By Ceyda Caglayan
ISTANBUL, Jan 13 (Reuters) – Turkey’s industrial powerhouses including Vestel, SASA and Arcelik, are poised to leave years of poor results and high costs behind by the end of 2026, as the painful taming of high inflation brings them and the broader economy some relief.
The big makers of electronics, appliances and other goods have borne the brunt of the central bank’s tight policies since mid-2023, and high interest rates, a strong lira currency and weak domestic demand have led to losses and hurt international competitiveness.
More than half of the 238 companies in the Istanbul bourse’s industrials index reported losses in the first nine months of last year, Reuters data shows. The manufacturing industry has shed some 600,000 jobs in three years, underlining the economic troubles that have hurt President Tayyip Erdogan’s standing in opinion polls.
With inflation at 31% and interest rates at 38% – and both declining only gradually – pain for industrial companies is set to continue in the first half of the year at least, according to executives and analysts. Some relief is seen towards the end of the year, as both rates and the lira are expected to settle lower.
“We expect demand to increase in 2026 as interest rates fall, having a positive impact on our domestic sales,” said Bulent Yilmazel, financial affairs and investor relations group manager at SASA, among the largest global polyester producers.
“High inflation and interest rates in Turkey led to a contraction in domestic demand, which was a major problem in 2025,” Yilmazel told Reuters.
SECTOR NEEDS RATE CUTS
Beginning with the first of a series of lira crashes in 2018, big exporters benefited for a while from currency devaluation and relatively low borrowing costs under Erdogan’s easy-money policies. But that changed in the last two years as interest rates were hiked as high as 50%, and as the central bank also largely stabilised the currency to contain import inflation.
The bank is now cutting rates, which according to a Reuters poll are seen falling to 28% by year end – which would spell some cost relief for industrialists.
Cemal Demirtas, head of research at Ata Invest, said rates need to fall below 30% for these companies to recover. “We expect to feel a little more relief starting in the second half of 2026,” he said.
After a meeting with Central Bank Governor Fatih Karahan last week, Turkey’s main exporters group TIM said the bank was poised to support the sector more, including possibly with incentives for converting FX earnings.
CHALLENGES AT HOME AND ABROAD
Among the hardest hit industrials are Vestel Elektronik, the consumer electronics company, and Arcelik, the home appliance maker and top player in Europe with its Beko brand.
In the first nine months of last year, Vestel topped the list of all loss-making Istanbul-listed industrials with an 18.3 billion lira ($430 million) loss, followed by SASA’s nearly 10-billion lira loss and Arcelik’s 6.4-billion lira loss.
In their latest results assessments, all three companies cited weak demand in Europe and Asia as another major challenge. Vestel said the lira’s real appreciation “led to higher labor costs in euro terms, weighing on profitability” in the first three quarters of 2025, while Arcelik cited pricing pressures.
Arcelik and Vestel declined to comment on the outlook for 2026.
Yilmazel of SASA said it was not easy coping with the high financing expenses, which he called the main reason for last year’s loss. This year, he said SASA will likely refinance a large portion of loans to take advantage of falling rates.
“As the interest rates keep falling, recovery will be felt more. The second half of the year looks set to be much better than the first half,” Yilmazel said.
ECONOMIC TROUBLES, ELECTION ON HORIZON
Wall Street bank JPMorgan said last December, Arcelik had been expected to begin recovering in the second half of 2025 – until the central bank was forced to delay, and temporarily reverse, its easing cycle earlier in 2025 due to political risks.
Years of high inflation and the added pressure of high borrowing costs have left Turkish consumers under pressure, constraining pricing power, JPMorgan said.
As Erdogan prepares for a vote in the next two years, economic worries have weighed on his re-election prospects and kept the main opposition level with his ruling party, opinion polls show.
Analysts say the government’s inflation forecasts – 16% by end-2026 and 9% by end-2027 – are too optimistic, suggesting a slower and riskier path to recovery for the industrial companies.
Imer Ozer, general manager of chemical products manufacturer at Kocaeli-based Koruma Temizlik, said costs rose 20-30% annually over the last two to three years and sales couldn’t keep up.
“With inflation falling moderately, interest rates declining at a steady pace and with predictability increasing, a recovery for industrials will be more apparent in the second half of the year,” Ozer said in an interview.
($1 = 42.7329 liras)
(Reporting by Ceyda Caglayan; Editing by Jonathan Spicer, Alexandra Hudson)
