PART 1
In the first nine months of 2025, Türkiye attracted $11.4 billion in foreign direct investment, up 46% year-on-year. On paper, this is a strong performance, confirming global capital's interest in Türkiye. However, a reverse dynamic is simultaneously unfolding: Turkish businesses are accelerating the transfer of their investments abroad.
A dual flow is emerging:
➡️ inbound foreign portfolio and corporate investments,
➡️ outbound capital from Turkish companies that prefer to build new production facilities in other countries.
This constitutes the primary structural risk for the economy over the medium term.
What the structure of foreign investments reveals
Of the $11.4 billion entering the country in January–September 2025:
• $8 billion is investment equity capital, but predominantly in wholesale and retail trade, the food industry, and ICT;
• $1.6 billion represents real estate acquisitions by foreign nationals;
• $2.6 billion entered via debt instruments.
The majority of these inflows do not flow into the manufacturing sector.
This means that a significant volume of capital is not arriving for long-term manufacturing, exports, and value-added expansion, but rather for:
• high interest rates,
• speculative opportunities,
• stable carry trade operations.
In other words, Türkiye is becoming a transit hub for global “hot money” rather than a final destination for genuine industrial investments.
Why are portfolio inflows growing? Three factors have made Türkiye attractive once again:
- High real interest rates
For international funds, this provides rapid and transparent yields.
- A renewed stability narrative
The macroeconomic discourse has grown more predictable and market-oriented.
- The country’s geoeconomic position
Türkiye remains a strategic logistics and industrial hub.
Yet this capital does not establish factories or generate jobs; it merely responds to interest rate differentials. Such capital departs just as swiftly as it arrives.
#turkeyeconomy #capitalflows #fdiinsight #hotmoney #structuralrisk