Exchange Rate Volatility in Türkiye and Its Impact on SMEs in 2025

The Turkish economy continues to experience significant currency fluctuations in 2025, and these developments have a multifaceted impact on small and medium-sized enterprises (SMEs). The current environment presents both challenges and dynamic opportunities for entrepreneurs operating or investing in Türkiye.

Current Exchange Rate Trends

The Turkish lira has continued to lose value gradually in 2025. At the end of October 2025, 1 US dollar traded around 41.95 TL, and by November 1, it rose slightly to 42.06 TL. Throughout late October, the lira fluctuated around 41.96 TL, reflecting ongoing pressure on the currency.

Since the beginning of the year, the lira has depreciated by approximately 18%. The October peak of 42.18 TL marked one of the strongest signs of underlying market vulnerability. These fluctuations underline the importance of close monitoring for importers, exporters, and investors alike.

Main Drivers of Exchange Rate Movements

Macroeconomic Conditions

Several macroeconomic factors lie behind the depreciation of the Turkish lira. Inflation accelerated to 33.29% in September 2025 after fifteen months of decline. The main reasons include an increase in food prices and agricultural supply disruptions caused by drought and cold weather conditions.

Monetary Policy Decisions

The Central Bank of the Republic of Türkiye (TCMB) carried out its third consecutive interest rate cut in October 2025, lowering the policy rate by 100 basis points. While this move seeks to support liquidity and loan growth, it also puts downward pressure on the national currency.

Managed Exchange Rate Regime

The Central Bank maintains a strong presence in currency markets to stabilize rapid movements. The government’s managed float policy aims to ensure that the nominal depreciation of the lira remains slower than inflation. In exceptional circumstances, direct interventions are used to achieve temporary balance.

Impact on SMEs

Import-Dependent Businesses

For import-reliant SMEs, exchange rate increases directly raise costs. Sectors dependent on foreign inputs, such as manufacturing or retail trade, face growing price pressures. Rising input costs tighten profit margins and challenge financial planning, particularly for businesses importing raw materials or semi-finished products.

Export-Oriented SMEs

The situation for exporters is more complex. While a weaker lira can improve competitiveness abroad, Türkiye’s “real appreciation” policy limits the extent of this advantage. Persistent domestic inflation of above 30% further erodes potential export gains. As a result, exporters must review their pricing strategies and adjust contracts accordingly.

Financial Risk and Hedging Limitations

Volatility in currency markets increases the cost of hedging and reduces access to risk-management instruments. SMEs with limited liquidity often struggle to utilize financial derivatives, making them more vulnerable to short-term exchange rate shocks. Proactive financial planning and flexible cash-flow management are essential in this environment.

Market Outlook and Forecasts

Analysts anticipate that the USD/TRY exchange rate may remain near 42 TL in the short term, although future movements will depend on inflation data and upcoming reserve figures. Based on current macroeconomic indicators, a moderate stabilization trend is possible, but investor sentiment remains cautious.

According to recent projections, the exchange rate is expected to trade around 41.78 TL by the end of this quarter and near 41.19 TL within the next 12 months. However, external shocks or changes in monetary policy could shift this trajectory quickly.

Strategic Recommendations for International Entrepreneurs

1. Focus on Medium-Term Strategy

Instead of reacting to daily volatility, entrepreneurs should build medium-term strategies grounded in macroeconomic data and local insights. In an environment of fluctuating exchange rates, disciplined planning can offer more stability than short-term speculation.

2. Use Risk Management Tools

Businesses exposed to currency fluctuations should consider using financial instruments such as forward contracts or swaps to safeguard their positions. Monitoring major central bank policy updates is critical, as global liquidity movements strongly influence Türkiye’s currency performance.

3. Recalibrate Pricing and Procurement Models

Both exporters and importers should revise their pricing models regularly to adapt to changes in inflation and exchange rates. Import-driven SMEs can mitigate risks through supplier diversification or local sourcing adjustments. Exporters can leverage flexible pricing in foreign markets to sustain competitiveness.

4. Strengthen Financial Reporting and Accounting Practices

Transparent and precise financial reporting is increasingly important. Businesses should separately manage balance sheet and cash-flow risks to maintain stability. Strong financial documentation also enhances credibility with investors and financial institutions.

Conclusion

Despite the uncertainties surrounding Türkiye’s exchange rate environment, SMEs that adopt an analytical and risk-aware approach can navigate these challenges effectively. For international entrepreneurs, Türkiye remains a market of high potential—offering opportunities for those who combine discipline, adaptability, and long-term strategic vision.