Turkey's debt surge fuels household and corporate distress

Turkish officials warned that a sharp rise in household, SME and corporate borrowing is pushing the economy into a debt‑interest spiral. Between July 2025 and July 2026, total individual credit grew 42% to 6.677 trillion lira, with credit‑card debt up 43% and consumer loans up 44%. At the same time, non‑performing loans jumped 78%, with delinquent consumer credit rising from 96.8 billion to 178.7 billion lira and agricultural arrears tripling to 24.9 billion lira.

The high‑interest policy is also eroding industrial profitability. Manufacturing firms are seeing profits diverted to finance costs, weakening investment appetite and competitive pricing. Industry representatives cite rising financing costs, delayed investments and higher production expenses as threats to Turkey’s export competitiveness, especially against China. Analysts note that without policy adjustments, the debt burden could trigger a wave of personal bankruptcies and further strain the real sector.