Economic Impact of Inflation and Turkish Lira Fluctuations on Foreign Entrepreneurs in Türkiye

In December 2025, Türkiye’s annual inflation rate fell to 30.89%, continuing its downward trend from previous months. This represents a significant improvement after closing 2024 with an inflation rate of 44.38%, reflecting the growing effectiveness of monetary tightening policies implemented by the Central Bank of the Republic of Türkiye (CBRT).

Inflation Trends

Following the CBRT’s revision in November 2024, annual inflation for that year settled at around 44%. Throughout 2025, inflation gradually decreased, reaching 32.87% in October, 31.07% in November, and 30.89% in December.

Initially, the CBRT projected end-2025 inflation at 14%, but this forecast was revised upward to 21% in November 2024. However, actual figures turned out to be more favorable than expected, indicating that sustained monetary tightening has been effective in taming inflationary pressures.

Economic Effects on Foreign Entrepreneurs

Exchange Rate Volatility and Cost Risks

High inflation continues to exert devaluation pressure on the Turkish lira, raising costs forforeign currency–denominated inputs. In the second half of 2024, market participants expected the year-end exchange rate to average around 37.3 lira per U.S. dollar. Such fluctuations increase uncertainty in pricing imported materials and calculating project costs, posing challenges for businesses operating in Türkiye’s volatile market environment.

Service Sector Inflation

According to CBRT officials, the persistence of elevated service inflation played a major role in revising 2024 projections. Rising rental costs, logistics expenses, and labor wages contribute to higher operational expenditures. For foreign entrepreneurs running service-oriented businesses—particularly in areas such as consultancy, tourism, and technology—these pressures can narrow profit margins and influence long-term investment decisions.

Impact of Food Prices

In 2024, food prices contributed approximately 1.6 percentage points to annual inflation. This had a direct impact on retail, tourism, and hospitality businesses by tightening their operating margins. Fluctuations in agricultural supply chains and external price dependencies continue to affect cost management strategies in these sectors.

Monetary Policy and Business Climate

To sustain disinflation throughout 2025, the CBRT committed to maintaining a tight monetary policy stance with relatively high interest rates. While this supports price stability, it also leads to elevated borrowing costs, making financing more expensive for capital-intensive ventures.

Macroprudential regulations have been introduced to curb excessive credit growth, contributing to slower domestic demand recovery. Market participants currently expect Türkiye’s 2025 GDP growth to hover around 3.5%, reflecting a modest deviation from the CBRT’s more conservative output gap projections.

Leading Indicators and Future Outlook

The December 2025 inflation figure came in below market expectations, reinforcing optimism that a gradual monetary easing phase may begin in the near term. Looking ahead, forecasts suggest inflation could decline to around 9% by 2027, indicating a steady path toward price normalization and improved macroeconomic stability.

For entrepreneurs considering entry or expansion in Türkiye, the evolving policy environment presents both challenges and opportunities. Staying informed through reliable sources such as the Turkish Statistical Institute (TÜİK) and the CBRT can help foreign investors align their strategies with Türkiye’s shifting economic dynamics.