YEAR-ENDER - Türkiye in 2025: Strong growth, cooling inflation, defense export boom

ISTANBUL

Türkiye is closing 2025 as one of the most transformative years of the past decade, marked by a rare convergence of economic stabilization, expanding global trade and an unprecedented surge in defense and high-technology capabilities.

After a period of volatility, the country entered a swift disinflation cycle in 2025, restoring confidence and predictability for households, investors and exporters alike.

At the same time, record-breaking exports – led by manufacturing, defense and technology – underscored the growing sophistication of Türkiye’s production base.

The year also stood out for breakthroughs in aerospace and defense, where indigenous platforms and high-profile contracts elevated Türkiye’s position as a major global supplier.

Taken together, these trends saw Türkiye consolidate its position as a regional technological hub, a rising exporter and a resilient economy navigating a challenging global landscape, supported by assertive industrial policy, disciplined macroeconomic management and expanding international partnerships.

Strong growth despite global headwinds

Türkiye’s gross domestic product is projected to reach around $1.48 trillion by the end of 2025, continuing a dramatic rise from roughly $238 billion in 2002. Looking ahead, the economy is expected to expand further to $1.84 trillion in 2026, Vice President Cevdet Yilmaz said in October.

Over recent decades, Türkiye has posted average annual growth of around 5%, ranking among the fastest-growing economies in the Organization for Economic Co-operation and Development (OECD).

Growth remained resilient in 2025 despite disruptions to global trade. In the third quarter, the Turkish economy expanded 3.7% year-on-year – the fourth highest among OECD countries, President Recep Tayyip Erdogan said.

In the second quarter, the Turkish GDP expanded by 4.9%.

While quarterly momentum softened, exports, industrial output and technology-driven sectors provided crucial support, helping cushion the economy against external headwinds.

Inflation marks a turning point

One of the defining developments of 2025 was the sustained decline in inflation after years of intense price pressures.

After peaking above 75% in 2024, annual inflation trended steadily lower throughout 2025. Consumer price inflation fell to 39% in February, marking the ninth consecutive monthly decline. By May, it eased to 35.4%.

The downward trend continued through the summer, with inflation reaching 33.5% in July, a 44-month low. In November, it slowed further to 31.07%, the lowest reading in four years.

Monthly price increases also moderated, dipping below 1% for the first time in over two years – a key signal that inflationary pressures were easing broadly across the economy.

The Turkish Central Bank forecasts year-end inflation in the 31%-33% range, with a continued decline toward 13%-19% in 2026. Finance Minister Mehmet Simsek has said inflation could fall into the 20% range early next year.

Record exports led by defense and high-tech goods

Exports were another standout of 2025. Total exports reached $390 billion as of October, the highest in Türkiye’s history, while merchandise exports hit $270 billion, exceeding national targets.

Manufacturing, vehicles, machinery and technology-intensive products led the expansion. The share of medium- and high-technology goods exceeded 40% of manufacturing exports, signaling structural transformation.

Critical technology exports – including aerospace, electronics, medical devices and digital systems – reached $80.7 billion in the first nine months of the year.

The defense and aerospace sector delivered some of the most striking gains. Defense and aerospace exports reached $8.5 billion in 2025, year-to-date, according to Türkiye’s Defense Industries Secretary Haluk Gorgun. The figure rose from $7.1 billion last year.

Trade Minister Omer Bolat said the Turkish defense sector, as of mid-year, had around 3,500 firms employing roughly 100,000 people.

Türkiye has largely completed its transition from defense importer to designer, producer and exporter, with a domestic localization rate exceeding 80%, sharply reducing foreign dependency.

Several Turkish companies ranked among the world’s top 100 defense manufacturers, including Aselsan, Turkish Aerospace Industries (TAI), Roketsan, ASFAT and MKE.

Global partnerships reshape Türkiye’s defense footprint

Defense growth in 2025 extended beyond exports, reinforcing Türkiye’s technological sovereignty and international partnerships.

In July, Türkiye’s leading drone manufacturer Baykar finalized its acquisition of Italy’s 140-year-old Piaggio Aerospace, including production facilities.

Baykar also signed cooperation agreements with Italian defense giant Leonardo, forming a joint venture, LBA Systems, blending AI-driven Turkish platforms with European aerospace expertise to co-develop next-generation unmanned aerial vehicles (UAVs) for the European market.

TAI secured a €3.12 billion ($3.62 billion) agreement in Spain to co-produce and export HURJET, Türkiye’s indigenous jet trainer and light attack aircraft. It also signed cooperation deals with BAE Systems in the UK on uncrewed systems, and with Indonesian firms to export 48 KAAN fifth-generation fighter jets, covering production, engineering and technology sharing.

Defense breakthroughs

Türkiye’s defense industry also recorded a series of firsts in 2025.

A $6.5 billion contract was signed to strengthen the Steel Dome integrated air defense architecture, a multilayered system spanning short-, medium- and long-range air defense.

Baykar’s Bayraktar KIZILELMA, Türkiye’s first uncrewed fighter jet, made aviation history by becoming the world’s first UAV to fire a beyond-visual-range air-to-air missile, striking a high-speed jet target with pinpoint accuracy using the locally developed GOKDOGAN missile during a test.

Meanwhile, the Bayraktar TB3, designed for short-runway naval operations, completed more than 100 sorties aboard the UAV carrier TCG Anadolu, demonstrating AI-supported automatic takeoff and landing.

Bayraktar TB3 later conducted a joint operation with Aselsan’s Albatros-S kamikaze unmanned surface vehicle, demonstrating its joint operational capability.

At this year’s International Defense Industry Fair (IDEF), defense giant Roketsan unveiled Tayfun Block-4, Türkiye’s first hypersonic missile. The Defense Ministry also showcased GAZAP, the country’s most powerful conventional aerial bomb, weighing 970 kilograms (around 2,000 pounds) and the NEB-2 Ghost, described by one official as the "best bunker-buster in the field."

Showcasing innovation at home

Türkiye’s advances were on full display at IDEF 2025, where domestic firms presented cutting-edge platforms ranging from autonomous systems to next-generation armored vehicles.

TEKNOFEST, Türkiye’s flagship technology and aviation festival, drew 1.03 million visitors in Istanbul in September. The five-day event at Ataturk Airport was organized by the Turkish Technology Team (T3) Foundation and Türkiye’s Industry and Technology Ministry.

TEKNOFEST also held a maritime version called Blue Homeland in August. The four-day event, hosted by the Istanbul Shipyard Command, highlighted Türkiye’s naval strength and cutting-edge technologies.