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Turkish businesses face rising insolvency rates

Store in Istanbul City: Turkish businesses braced for challenging times as insolvency rates climb, evidenced by a 28% increase in liquidations compared with the same period last year Alamy via Reuters
A store in Istanbul: Turkish businesses are braced for challenging times as insolvency rates climb, evidenced by a 28% increase in liquidations compared with the same period last year
  • Monthly rises in protection orders
  • Supply chain domino effect
  • Bleak 2025 outlook

The Turkish economy is set to be hit by a rising tide of business insolvencies, with near-record numbers of companies going to the wall, which in turn could result in a domino effect along the business supply chain.

While many countries will experience a rise in insolvencies, Turkey will be among the hardest hit this year.

With high financing costs and an economic slowdown, Turkey is likely to experience an increase in insolvencies of around 20 percent year on year in 2024, a study by trade credit insurance company Allianz Trade said. A further 8 percent rise is forecast for 2025. 

But economist Ümit Özlale says this number is likely to increase well above the projected level with potentially worse to follow in 2025 if inflation cannot be brought under control. 

“I believe that the increase will be more than the 20 percent mark,” Özlale told AGBI.

“Even if all these companies do not go bankrupt, there will also be many that will come to the point of closing down.”

In the seven months to July, almost 15,000 businesses closed their doors across Turkey, according to the most recent report issued by the Union of Chambers and Commodity Exchanges of Turkey. Company liquidations rose by 28 percent compared with the same period in 2023. 

In addition, almost 1,200 companies have been granted initial bankruptcy protection – concordat as it is termed in Turkey – in the first nine months of the year. That is more than double the total for all of 2023, business monitoring site konkordatotakip.com reported this month. 

With monthly totals of protection orders rising from 114 in July to 205 in September, it is likely the 2024 year-end figure will exceed the 1,387 for 2019, the previous highest level in recent years.

Turkey’s central bank, however, has downplayed the rising tide of insolvencies. A report issued at the end of September said the broader economic impact of the company closures was relatively minimal, and most shuttered or protected businesses were at the smaller end of the spectrum. 

Yet Özlale said every insolvency or declaration of bankruptcy protection will create a chain reaction that will cause ripples, however small, across the economy. 

“If no measures are implemented against these insolvencies and concordats it will have a domino impact on the Turkish economy,” he said.

“The risk arises from these companies not paying other firms in the real sector. Why should they suffer when a company in their supply chain has announced bankruptcy protection?”

One suggestion to stem the bankruptcy bleeding would be to let struggling businesses suspend payments on their debts to the state and banks, while continuing to pay off what is owed to other private sector debtors, Özlale said, potentially allowing them to trade their way out of difficulties without knocking over any dominos.