The Impact of Exchange Rate Fluctuations on Türkiye’s Textile Industry (2024–2025)

The Turkish textile industry has undergone a profound transformation during 2024–2025 as a result of persistent exchange rate volatility. These fluctuations have not only redefined the sector’s cost structure but also reshaped its competitive position in international markets.

Impact of Exchange Rate Volatility on Cost Structure

Imported Raw Material Costs

Türkiye’s textile industry is highly dependent on imported raw materials, making it one of the sectors most vulnerable to currency volatility. As a large portion of cotton, polyester, and synthetic fibers are sourced from international suppliers, every rise in foreign exchange rates directly increases production costs. In 2024, government interventions to stabilize the exchange rate led to price distortions and higher input costs for manufacturers.

Rising Energy Costs

Energy price increases, combined with volatile exchange rates, created a dual burden for textile producers. The joint effect of fluctuating raw material and energy prices pushed many companies toward insolvency. Numerous firms struggled with liquidity while attempting to sustain operations in a highly inflationary environment.

Corporate Bankruptcies and Financial Crisis

Wave of Bankruptcies

Between 2024 and 2025, the industry experienced a chain reaction of bankruptcies. The collapse of major players such as Karbel Tekstil illustrates the severity of the crisis. Rising production expenses and a shrinking domestic market made survival impossible for many small and mid-sized manufacturers.

Impact of High Interest Rates

In 2024, the Central Bank of the Republic of Türkiye raised benchmark interest rates to around 50 percent. This move, while aimed at curbing inflation, crippled the borrowing capacity of firms. The high cost of credit made refinancing existing debts difficult, further weakening financially strained companies.

Changing Export Competitiveness

Theoretical vs. Practical Outcomes

In theory, a weaker Turkish lira should boost export competitiveness by making Turkish products cheaper abroad. In practice, however, exporters often compensate for volatility by lowering foreign-currency prices or offering additional discounts to foreign buyers. Importers, aware of the currency depreciation, frequently demand price adjustments, limiting the expected gains from currency devaluation.

Trade Balance Effects

While currency depreciation tends to slow imports, it does not necessarily increase exports at the same rate. This imbalance has reshaped the industry’s external trade structure and forced producers to rethink their long-term export strategies.

Current Situation as of 2025

Inflationary Pressures

In the first quarter of 2025, price growth in clothing and footwear accelerated significantly. Adjustments in electricity and natural gas prices, combined with currency volatility, continue to be major factors driving inflation trends and consumer costs across Türkiye.

Global Risk Factors

Worldwide protectionist policies, rising customs tariffs, and ongoing geopolitical tensions have emerged as new sources of uncertainty. Additionally, fluctuations in global energy and commodity prices have maintained their influence on Türkiye’s textile production costs and export demand.

Implications for International Entrepreneurs

Loss of Cost Advantage

Türkiye’s traditional labor-cost advantage has considerably eroded since 2022. With cumulative minimum wage increases of 100–200 percent and continuing exchange rate instability, labor expenses by 2023 reached around USD 1,100 per worker. This shift has weakened Türkiye’s position as a low-cost manufacturing hub in the global textile value chain.

Emergence of Alternative Production Regions

Countries such as India, Pakistan, Bangladesh, and Egypt, where minimum wages remain in the range of USD 100–150, are increasingly becoming attractive alternatives for global buyers. Surprisingly, even EU members like Portugal have managed to maintain lower production costs than Türkiye in certain textile segments.

Risk Management and Strategic Planning

Given the persistent volatility of the Turkish lira, stability has become more valuable than short-term competitive gains. Exporters and investors prioritize predictable exchange conditions and a reliable business environment over temporary currency depreciation. For long-term investors, this underlines the importance of careful financial planning, currency hedging, and market diversification.