Turkey has been suffering from separatist terrorism and the political conflict it implies since the mid 1980s, both of which are believed to have a negative impact on economic welfare. This article investigates the economic costs of PKK -Kurdistan Workers’ Party- terrorism, particularly in the Eastern and Southeastern provinces of Turkey by invoking the synthetic control method. We create a synthetic control group that mimics the socioeconomic characteristics of the provinces exposed to terrorism before the PKK terrorism emerged in the mid-1980s. We then compare the real GDP of the synthetic provinces without terrorism to the actual provinces with terrorism for the period 1975-2001. Causal inference is carried out by comparing the real per capita GDP gap between the synthetic and actual provinces and the intensity of terrorist activity as measured by the number of terrorism casualties. We find that after the emergence of terrorism, the per capita real GDP in Eastern and Southeastern Anatolia declined by about 6.6 percent relative to a comparable synthetic Eastern and Southeastern Anatolia without terrorism.