Turkey's GDP growth slows to 2.5% in the first quarter as the Iran war lifts energy costs

Turkey's economy lost momentum at the start of 2026, growing 2.5 percent year-on-year in the January-March quarter -- down from 3.4 percent in the previous three months and below the 2.7 percent forecast -- according to the Turkish Statistical Institute (TurkStat). On a seasonally and calendar-adjusted basis it expanded just 0.1 percent from the prior quarter. The slowdown coincided with the start of the US-Israel war on Iran, which sent energy prices soaring and revived inflationary pressures.

The composition was uneven. Information and communication led with 9.5 percent annual growth, followed by other services at 5.2 percent and agriculture at 4.6 percent -- a rebound after last year's frost- and drought-hit harvest -- while the industrial sector contracted 0.8 percent. Household consumption rose 4.8 percent, but exports of goods and services fell 12.7 percent and imports dropped 2 percent. At current prices, GDP reached 16.99 trillion lira ($389.6 billion).

Treasury and Finance Minister Mehmet Simsek said the economy had now grown for 23 consecutive quarters, with national income exceeding $1.6 trillion, but acknowledged that "global uncertainties and the weak outlook among our trading partners" had limited growth. He said rising energy costs had caused "a temporary slowdown in the disinflation process" while insisting the government's "determined stance in the fight against inflation continues."

Inflation has proved stubborn: consumer prices rose 4.18 percent in April for an annual rate of 32.37 percent, driven by the Iran-war fallout. The Central Bank of the Republic of Turkiye, flagging the risk of second-round effects, last month raised its end-2026 inflation target to 24 percent from 16 percent and its end-2027 target to 15 percent from 9 percent.