Economy cracking at the seams: Erdogan faces a new blow

The Turkish economy has been hit by a new crisis: the Istanbul Stock Exchange sharply collapsed, with the BIST 100 index losing 5.54% in a single session. Inflation remains above 30%, and the lira is trading at nearly 49 to the dollar. The crash occurred as retail investors withdrew about $1 billion from funds. Authorities have frozen operations of several funds and launched investigations into possible market manipulation.

The Turkish economy has received a new alarming signal: the Istanbul Stock Exchange experienced a sharp collapse. The BIST 100 index lost 5.54% in a single trading session, the banking sector fell 6.38%, and holding companies dropped 6.48%. For President Recep Tayyip Erdogan, this comes amid high inflation (31.51% annually) and a weakening lira, which is trading at nearly 49 to the dollar—having depreciated almost sixfold over five years. According to Channel 14, the BIST 100 has risen approximately 850% in lira terms over the past five years, but a significant portion of the nominal growth occurred during a period of rapid price increases and the national currency's decline. The Financial Times reports that the September 16 crash occurred as retail investors withdrew about $1 billion from investment funds. One major manager, Pusula Portföy, faced difficulties in timely meeting some client redemption requests. Turkish authorities are already trying to contain the fallout: regulators have frozen operations of several funds, and dozens of people have come under scrutiny by prosecutors in cases of possible market manipulation. The government's financial stability committee claims the situation remains localized and manageable. For Erdogan, the problem lies in a combination of factors: he must simultaneously reduce inflation, maintain confidence in the lira, support economic activity, and prevent the stock market crisis from spreading. The central bank recently raised its inflation forecast for the end of 2026 from 26% to 28%.