Türkiye sees record business closures amid rising costs in 2024

The Turkish economy is facing a record increase in business closures, driven by rising costs and a strong lira.

According to data from the Union of Chambers and Commodity Exchanges of Türkiye (TOBB), 15,000 companies have closed so far in 2024, representing a 28% increase from last year.

The closures have been particularly effective in Türkiye’s garment and textile sectors. Many companies have applied to the courts for protection to avoid bankruptcy. In Corum, a clothing factory producing for Zara reduced its capacity by 60% after laying off a third of its workforce.

Inflation and cost increases

Inflation in Türkiye has fallen from more than 75% earlier this year to now 52%. However, large increases in electricity and natural gas prices are adding to pressure on firms. Gas prices for small and medium-sized producers have increased seven-fold since 2021, while electricity prices have tripled.

The overvaluation of the Turkish lira has weakened the country’s competitiveness in the global market. In particular, Turkish exporters are struggling to cope with rising costs and lower profit margins, unable to compete with countries such as Vietnam and Bangladesh.

Interest rate hikes and financial pressures

Since June 2023, the government’s tight monetary policies have raised interest rates by a cumulative 41.5 percentage points. This has deepened exporters’ financial difficulties by making it harder to access credit. Production costs in Türkiye are reportedly 40% higher than their Asian competitors, leading to rising unemployment and payment delays.

In 2024, the government raised the minimum wage to ₺17,002 (roughly $500), imposing an additional cost burden on employers and employees. The minimum wage was increased by 100% compared to 2023 and by 500% compared to the end of 2021.