Resilient Export Growth Amid Global Shifts

Despite global headwinds, Turkey’s exports reached $296.4 billion in 2025, with robust performance in high-tech, defense, and diversified markets. However, cost pressures and shifting EU trade rules create sectoral winners and losers, requiring adaptive strategies.

Labor Market Saudization Intensifies

The government has raised Saudization rates to 60% in key private sector roles, including marketing and sales, and restricted senior positions to nationals. These measures impact expatriate hiring, increase compliance costs, and require strategic workforce adjustments for international businesses.

Reconstruction-driven infrastructure demand

Three years after the 2023 quakes, authorities report 455,000 housing/commercial units delivered, while multilateral lenders like EBRD invested €2.7bn in 2025, including wastewater and sewage projects. Construction, materials, logistics and engineering opportunities remain, with execution and procurement risks.

MSCI Flags Market Transparency Risks

MSCI has frozen Indonesian stock index rebalancing due to transparency and free float concerns, threatening a downgrade from emerging to frontier market status. This could trigger capital outflows, raise financing costs, and undermine investor confidence.

Liberalized Real Estate Laws Attract Foreigners

Recent amendments allow foreign ownership of Saudi land, sparking international interest in major urban and tourism projects. The new framework is reshaping the real estate sector, drawing investors and developers, though restrictions remain in Makkah and Madinah.

Infrastructure Expansion And Connectivity

Major investments in expressways, airports, and logistics hubs are underway, targeting 5,000 km of expressways by 2030. Improved transport infrastructure is expected to boost regional integration, reduce logistics costs, and enhance supply chain resilience for international businesses.

Outbound investment screening expands

New U.S. outbound investment restrictions for semiconductors, quantum, and advanced AI create approval or notification burdens for cross-border deals and R&D. Companies must reassess Asia tech exposure, ring-fence sensitive IP, and build deal timelines around regulatory review risk.

Persistent Energy Infrastructure Attacks

Russian strikes on Ukraine’s energy grid have caused widespread blackouts and threaten business continuity. Nearly 60% of Kyiv was recently without power, with similar conditions nationwide. Energy insecurity remains a top risk, impacting manufacturing, logistics, and foreign investment confidence.

China Exposure and Supply Chain Risks

German industry’s deep integration with China, especially in automotive and high-tech sectors, creates strategic vulnerabilities. Recent government commissions highlight growing awareness, but slow policy action leaves supply chains and critical infrastructure exposed to geopolitical shocks and Chinese competition.

Rupee flexibility and policy transmission

RBI reiterates it won’t defend a rupee level, intervening only against excessive volatility; rupee touched ~₹90/$ in Dec 2025. For importers/exporters, hedging discipline and INR cost pass-through matter as rates stay on hold and liquidity tools drive conditions.

Agricultural Export Access and Resilience

China’s tariff cuts on canola, peas, and seafood restore access to a market worth billions for Canadian farmers. The agreement alleviates pressure from previous trade disputes, but ongoing geopolitical risks and market concentration remain key concerns for agri-food exporters.

Trade Diversification Amid US Tariffs

Facing 50% US tariffs, India has accelerated trade agreements with the EU, UK, Oman, and New Zealand. This strategic pivot reduces dependence on the US, hedges against protectionism, and opens new markets for labor-intensive and technology-driven exports.

Tariff escalation and legal risk

U.S. tariff policy remains volatile, with high effective tariff rates and active litigation over emergency authorities. Companies face sudden duty changes, pricing pressure, and contract disputes, while investment timing hinges on court outcomes and negotiated exemptions across sectors.

Political Stability and Policy Continuity

India’s stable democratic institutions, policy continuity, and macroeconomic management underpin investor confidence. The government’s commitment to infrastructure, digital public goods, and inclusive growth ensures a predictable environment for international business and investment decisions.

Currency Volatility and Inflation Pressures

The Egyptian pound has experienced depreciation against the US dollar, though foreign reserves reached record highs. Inflation, while declining to 12.3%, remains a concern. Monetary easing is expected in 2026, with interest rates projected to fall, impacting investment and import costs.

Property slump and policy easing

Reports indicate easing of “three red lines” developer leverage oversight, signaling stabilization intent after defaults. Yet falling prices and weak confidence constrain growth and local-government revenue, affecting demand forecasts, supplier solvency, and payment/collection risk in China operations.

Textile rebound but cost competitiveness

Textile exports rebounded to a four-year high in January 2026 ($1.74bn, +28% YoY), helped by lower industrial power tariffs. Sustainability depends on input costs, logistics efficiency, and upgrading product mix as competitors gain better market access and buyers demand faster, cleaner production.

Geopolitical Risks and Trade Diversification

Turkey faces challenges from shifting global alliances, new EU and India FTAs, and regional tensions. Trade with India declined by over 14% in 2024–25, and exclusion from new FTAs limits market access, highlighting the need for diversified export strategies.

US Industrial Policy and Onshoring Wave

The US is leveraging trade deals and tariffs to attract unprecedented foreign investment, with over $5 trillion pledged by major partners for domestic manufacturing. This onshoring drive is reshaping global supply chains, especially in semiconductors and advanced manufacturing, but introduces new risks of retaliation, regulatory uncertainty, and supply chain fragmentation as partners hedge against US policy volatility.

Power stability, grid bottlenecks

Eskom reports 200+ days without load-shedding and higher availability, boosting operational continuity. However, slow transmission expansion and contested unbundling constrain new generation connections, risking future curtailment for energy-intensive firms and delaying renewable-led decarbonisation plans.

IMF conditionality and tax overhaul

IMF-driven stabilisation remains the central operating constraint: fiscal tightening, FBR tax-administration reforms through June 2027, and periodic programme reviews influence demand, public spending, and regulatory certainty. Businesses should plan for new levies, stricter compliance, and policy reversals.

Long-term LNG contracting shift

Japan is locking in multi-decade LNG supply to secure power for data centres and industry. QatarEnergy’s 27-year deal with Jera covers ~3 Mtpa from 2028, improving resilience but adding destination-clause rigidity and exposure to gas-demand uncertainty from nuclear restarts.

Macro resilience, currency strength

Israel’s shekel strength, low unemployment and expectations of further rate cuts support domestic demand and investment planning, while war risk premia remain. Foreign firms should hedge FX volatility, stress-test financing costs, and monitor credit-rating narratives and sovereign bond market access.

UK-EU Relations and Trade Frictions

Despite the Trade and Cooperation Agreement, UK-EU trade faces ongoing frictions, including customs checks, sectoral disputes, and unresolved issues in energy and services. These tensions add complexity and costs to cross-border operations.

Japan-China Tensions and Economic Security

Escalating tensions with China, including sanctions and military posturing, have led Japan to fortify its economic security laws, diversify supply chains, and boost domestic chip production. These measures are crucial for international businesses exposed to regional disruptions and coercive economic tactics.

Political Volatility and Diplomatic Strategy

President Sheinbaum’s approach to US relations emphasizes dialogue, sovereignty, and adaptability in the face of unpredictable US policy shifts. Ongoing communication with President Trump and Canadian leaders is crucial for maintaining trade stability and managing bilateral crises.

UK as a Stable Investment Destination

UK leaders are leveraging global volatility to position the country as a haven for investment, emphasizing regulatory stability, financial sector strength, and innovation in AI and tech. This narrative aims to attract capital and talent, but is tested by ongoing geopolitical shocks.

Port labor and automation tensions

East/Gulf Coast port labor negotiations and disputes over automation remain a recurring tail risk for U.S. logistics. Even with tentative deals, threats of slowdowns or strikes can disrupt ocean schedules, raise demurrage, and push costly rerouting toward West Coast or air freight.

Secondary Iran trade penalties

An executive order authorizes ~25% additional tariffs on imports from countries trading with Iran, effectively extending secondary sanctions through border measures. Multinationals must intensify supply-chain and customer screening, reassess third-country exposure, and anticipate retaliation and compliance costs.

Geopolitical Shifts and Regional Integration

Turkey's strategic location is increasingly pivotal amid shifting global alliances, conflicts in Ukraine and the Middle East, and EU enlargement debates. Ankara's foreign policy emphasizes regional cooperation, energy corridors, and mediation roles, affecting supply chains and cross-border investments.

Energy security and LNG logistics

PGN began supplying LNG cargoes from Tangguh Papua to the FSRU Jawa Barat, supporting power and industrial demand with distribution capacity up to 100 MMSCFD. Greater LNG reliance improves near-term supply resilience, but exposes users to shipping, price-indexation, and infrastructure bottlenecks.

Maritime regulation and Jones Act rigidity

Court affirmation and continued political support for the Jones Act sustain high domestic coastal shipping costs and limited capacity for inter-U.S. moves. Energy, agriculture, and construction inputs may face higher delivered costs, affecting project economics and intra-U.S. supply-chain design.

Investment Climate and SME Funding Gap

Renewed investor confidence is evident, with FDI pipelines growing, especially in renewables and tech. However, a R350 billion SME funding gap persists, as stricter governance and financial controls limit access to capital for smaller, informal businesses.

EU Trade Policy Realignment and Protectionism

Germany is navigating shifting EU trade policies, including new deals with India and Mercosur, and stricter rules on public funding for non-European production. Rising protectionism and regulatory changes could alter market access, supply chain strategies, and compliance costs for multinationals.

Landmark India-EU Free Trade Agreement

India’s comprehensive FTA with the EU, concluded in January 2026, eliminates tariffs on 90% of Indian exports and expands market access for goods and services. This deal will significantly boost bilateral trade, attract FDI, and enhance supply chain resilience, positioning India as a key alternative to China.

Intellectual Property Enforcement And Innovation

Vietnam is strengthening IP rights enforcement through new decrees, technological solutions, and international cooperation. Enhanced protection of intellectual property fosters a transparent business environment, boosts investor confidence, and supports the country’s innovation-driven growth.