Textile Sector in Turkey in 2025-2026
Crisis in Turkish Textile Industry from 2022 to Today: Deepening Challenges and Future Perspective
Turkey’s textile sector has been undergoing a major transformation in recent years due to the impact of economic crises. This process, which began in 2022, has deepened due to a combination of economic factors such as minimum wage increases, high inflation, exchange rate fluctuations, interest rate hikes, and Turkey’s tight monetary policies. As of 2024, the sector is on the verge of collapse due to these economic pressures. However, this crisis is not only due to the economic difficulties of a period; it is also seen as a result of the change in the global economy and serious structural problems related to Turkey’s production costs. If currency suppression continues in 2025 and 2026, the sector is expected to struggle even more. In this article, I will discuss this dramatic transformation in the Turkish textile sector, the challenges faced by players in the sector, and possible future scenarios in more detail.
1. The Crisis Starting in 2022: Minimum Wage Increases and Rising Costs
The year 2022 was a serious turning point for the textile sector in Turkey. In particular, the huge increases in the minimum wage have increased labor costs exponentially. The increases in the minimum wage, which ranged from 100% to 200% in 2022, have led to an astronomical increase in labor costs in the sector. Since Turkey's textile sector is a labor-intensive sector, these increases were directly reflected in production costs. The cost of a textile worker to the employer has risen to $1,100 by 2023.
This increase has put Turkish textile manufacturers in a very difficult situation because it has become increasingly difficult to compete with other major global manufacturing countries. For example, since the minimum wage in countries such as India, Pakistan, Bangladesh and Egypt has remained between $100-150, Turkish manufacturers have become much more expensive compared to these countries. Even in a developed country such as Portugal, a member of the European Union, production costs were lower than in Turkey. While Turkey has experienced such a high minimum wage increase for the first time in its history, this situation has led to brands, especially those producing in mass production, withdrawing from Turkey, shifting their production to other countries and many businesses going bankrupt due to cost pressures.
2. Minimum Wage Purchasing Power and Social Challenges
In the past, an individual working for minimum wage in Turkey would earn a monthly salary of $250-350, and with this income it was possible to buy a house, own a car and meet general living expenses. However, today the minimum wage is between $550-650. Even with this salary, many employees have difficulty meeting basic living expenses, and even rent payments have become a huge burden for many employees. With the rapid increase in energy prices (electricity, water, natural gas), rising food prices and high inflation, it has become very difficult to get by on minimum wage. It has become almost impossible to own a house or buy a car. Many employees are forced to struggle just to meet basic living expenses.
This situation creates an even greater problem for low-wage workers, especially in the textile sector. While in the past, workers’ living standards could increase to a certain level with a high minimum wage, now, despite the increase in salaries, their purchasing power has seriously decreased in the face of inflation. Many workers are even forced to take on additional work just to pay their rent or bills. This negatively affects worker motivation and productivity, causing disruptions in production processes.
3. 2023: High Inflation, High Interest Rates and Exchange Rate Pressures
By 2023, the textile sector has entered a much more difficult period as Turkey’s economic crisis deepens. High inflation rates, high interest policies and exchange rate fluctuations have pushed production costs even higher. High inflation in Turkey has particularly increased the prices of raw materials, which has significantly increased textile manufacturers’ input costs. The increase in the prices of cotton, polyester and other textile raw materials has directly affected production prices. However, exchange rate fluctuations have been the biggest problem because Turkey is a country that is largely dependent on imported raw materials for textile production. While exchange rate fluctuations have increased the prices of these raw materials, they have also increased the production costs of Turkish manufacturers.
The Central Bank chose to increase interest rates to control inflation. As of 2023, interest rates have risen to 25%. This has increased credit costs and made it difficult for businesses to find financing. High interest rates have caused Turkish textile companies, which were already in a difficult situation, to have even more difficulty paying their debts. In addition, uncertainties in exchange rates and tight monetary policy have made production processes even more uncertain, and many textile companies have been forced to go bankrupt as they could not afford the price increases.
The exchange rate pressures made Turkey's textile sector quite expensive in foreign markets. The prices of Turkish textile products began to be higher in international markets than in other competitor countries. The demand for Turkish products began to decrease, especially in large export markets such as the European Union and the USA, which are Turkey's traditional markets. As a result, major brands began to shift their production from Turkey to Asian countries with cheaper labor or to European countries with cheaper production such as Portugal.
4. 2024: Rising Interest Rates, Currency Suppression and Rising Energy Costs
The year 2024 has become a much more difficult period with Turkey's transition to a tight monetary policy. The Central Bank of the Republic of Turkey has increased interest rates to 50% in order to control inflation. These high interest rates have further increased the financial difficulties of companies in the textile sector. High interest rates have put many companies in the sector in a financial impasse. Businesses that were already struggling to cope with increasing costs were forced to go bankrupt due to interest rate hikes that made it even more difficult to obtain loans and roll over their debts.
The continued suppression of exchange rates has further reduced the competitiveness of the Turkish textile sector in global markets. Uncertainty in exchange rates has increased import costs, while raw material costs have also increased with the depreciation of the Turkish lira. However, Turkey has taken a series of measures to prevent the increase in exchange rates and has tried to prevent the depreciation of the Turkish lira. Despite these policies, the increase in import costs has caused the sector to become more expensive, and manufacturers have been unable to meet the price increases and have experienced a loss of demand.
Energy costs have also placed a huge burden on the sector. The astronomical increase in electricity, water and natural gas prices in particular has directly affected production processes. There has been a serious increase in energy prices since 2022. Electricity and natural gas prices have significantly increased the production costs of industrialists in particular. High energy consumption in textile factories plays a critical role in a large part of the production processes. Increases of up to 100% in electricity prices have turned manufacturers' cost calculations upside down. In addition, the increase in natural gas prices has caused energy costs to rise even further, especially in the winter months. This situation has created a greater challenge for small and medium-sized textile companies, especially those operating with low margins. Many companies have had difficulty meeting these increasing energy costs and have had to reduce their production capacity.
5. Future Concerns: Situation in 2025 and 2026
If the foreign exchange pressures and high energy costs continue in 2025 and 2026, the Turkish textile sector is likely to struggle even more. During this period, Turkish manufacturers will become even more expensive, and production costs will increase exponentially with the increase in imported raw material prices. Competition with foreign markets will become much more difficult. Turkish textile companies will face major challenges, especially in the face of cheap labor in Asia and low-cost production in Europe.
In order for Turkey's textile sector to survive, it needs to switch to more efficient production methods, develop innovative solutions to control costs, and open up to new markets. However, this process will take time and be quite challenging. In this case, the only hope for the textile sector is to regain its competitiveness in global markets and establish a sustainable production model.
