Turkey Economy Facts
Turkey has undergone rapid economic development since the 1990s. Intensive construction activities have given new parts of the country a new profile. Cities are linked by new roads and the general standard of living has increased. But since 2016, a dark cloud has settled over the country. Political unrest with a government that is perceived as increasingly authoritarian has caused the public dissatisfaction to increase and foreign investors to doubt new ventures.
During much of the 2000s, the economy has grown by 6-8 percent each year. The export industry has had great success and Turkish companies in the construction and construction industries in particular are active in the Middle East, Central Asia, North Africa and the Balkans. Turkey’s rise as an economic superpower has given the country a place in the G20, the association of the world’s 20 largest economies (19 countries plus the EU) that regularly meets since 2008 to discuss the world economy.
- Countryaah.com: Major imports by Turkey, covering a full list of top products imported by the country and trade value for each product category.
In 2010 and 2011, the economy grew almost as fast as in China and India. The development went so fast that skeptics began to warn of a bubble that could burst at any time. The upturn coincided roughly with the Islamic-based party AKP’s government holdings since 2002, but the economic reforms behind the upswing had begun a few years earlier in cooperation with the International Monetary Fund (IMF), when the crisis was profound and drastic changes were necessary.
The banking sector was decontaminated and the central bank gained the same independent position as in most western countries, with inflation control via interest rate policy as a main task. The exchange rate was allowed to float, that is, adapted to the market situation, and major privatizations were implemented. The reforms meant that government debt fell from almost 70 percent of gross domestic product (GDP) in 2002 to below 33 percent in 2015. The central bank’s new interest rate policy pushed inflation from just over 53 per cent in 2001 to commute around 7–8 percent in 2016.
- Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including TUR which represents the country of Turkey. Check findjobdescriptions to learn more about Turkey.
However, economists have been worried by growing pressure on the central bank from the country’s political leadership, which wants to create growth by keeping interest rates low. President Erdoğan has argued that an “interest lobby”, which would be looking to harm Turkey financially, prevents the government from creating more jobs and giving people more in the wallet. In 2018, when inflation rose again, the central bank was expected to raise interest rates, but the decisions that came were not so clear. This created pressure on the currency, which fell rapidly in value, and increased concern for a banking crisis. The rate of inflation in autumn 2018 was the highest in 15 years and the economy even shrunk in the second half of 2018. (Minus figures two quarters in a row is the technical definition of recession.) The Turkish currency lost almost 30 percent of its value against the dollar in 2018. In the summer of 2019, the president’s patience ended. The governor was replaced and soon the key rate was lowered in several steps, from 24 percent interest rate in June 2019 to 9.75 percent in March 2020. The threat of lasting recession caused by the global spread was due to the president’s reason for wanting to keep the interest rate low. of coronavirus.
In September 2019 it was noted that inflation had dropped, it was down and turned below 10 percent for the first time in three years, but by the beginning of 2020 it was back at 12.5 percent. (The central bank’s goal is for inflation to remain at 8 percent by 2020.) Food prices had risen, as were prices for a number of other goods and services. And the growth in the economy was just nice and steady at the plus.
There is a parallel between how the political landscape has changed during the AKP’s time in power and the economic upswing. In both cases, the emphasis has shifted from an established community elite in Istanbul and Ankara, with anchoring in the secular state apparatus and the military, to a religious entrepreneurial class around Anatolia.
Many companies’ religiosity in 2016 pulled parts of the business community into the bitter power struggle that had erupted between the ruling party AKP and the Gülen movement (see Modern history and Current politics). In the large purges of, above all, public employees, which happened after a coup attempt, company executives were also arrested.
Traditionally, the Turkish economy has been a mix of modern industry and trade, along with a partially outdated agriculture. In recent years, the private manufacturing industry with textiles, vehicles and electronic goods has developed into the most dynamic sector.
The income gaps are large and continue to grow. There are also significant differences in the level of development between different parts of the country, where, however, a number of medium-sized cities have cracked down on Istanbul, Ankaras and Izmir’s headquarters.
The economy has been heavily state-controlled but gradually privatized during the market reforms of the past two decades. However, since the mid-2010s, there has been a tendency for the state to take control of private companies accused of participating in a conspiracy against the government for power-political reasons.
Large family-owned conglomerates have since played an important role. From previously owning mainly industries, the conglomerates have also included banks, newspapers and TV companies. Companies have often donated large sums to leading political parties in return for government contracts. This has been particularly evident during the AKP’s time in power, when the government in this way gained influence over the mass media.
The informal sector includes the production of goods and services that are not registered with the authorities. Although the sector has declined in the 2000s, it still gives millions of people their livelihoods. In 2013, 36 percent of all employees were estimated to be unregistered. The large informal sector means, among other things, that the state loses tax money.
As the economic wheels spin faster and more people are tempted to raise their standard of living, private loans have also increased. The problems with “bad loans”, ie borrowers unable to cope with interest rates and repayments, have increased, as has the number of bankruptcies, which put the banks under pressure. This has helped to slow down the economy and erode confidence in the government. Some analysts fear that Turkey is in the midst of a loan carousel where the country lives on its assets and may end up in the same difficult situation as some southern European countries in the EU.
Among Turkey’s disadvantages in a crisis is that the country lacks raw materials that can provide export earnings that can lift the economy. Nor does the country have high-tech production that can compete with advanced industrialized countries. Relatively low educational level is also an obstacle to strong technological development. And although the proportion of women in politics has increased, the position of women in the labor market has deteriorated during the 2000s. A 2016 study found that about two-thirds of women lacked employment. This was due not only to the lack of available work, but also to pressure from the family to stay home, low education and the feeling of unsafe working conditions.
One problem is also a constant current account deficit, simply because consumption is much higher than own production. To remedy this, the industry needs to find new export products, replace imported goods with its own production and reduce the growing need for imported energy. Controversial nuclear power plans are part of these efforts.
Infrastructure and tourism
The only outlet of the Black Sea, the Bosphorus and the Dardanelles with the intermediate Lake Marmara, is one of the world’s busiest shipping routes. According to the Montreux Convention of 1936, Turkey must allow merchant vessels from all countries to pass through peacetime, even without pilotage. The sound is difficult to navigate, and collisions and ground bumps occur. There are concrete plans to establish a channel for shipping traffic between Lake Marmara and the Black Sea to relieve the Bosphorus. There, Turkey could also charge for passing ships.
Several bridges and tunnels now connect Europe and Asia in the district of Istanbul. For several of the projects, Turkey has employed engineering companies from Japan, where, as in Turkey, it is necessary to include the risk of earthquakes in the calculations.
A fast train line between Istanbul and Ankara was inaugurated in 2014. In 2013, a Turkish consortium was commissioned to build a third major airport outside Istanbul for EUR 22.1 billion. The first terminal was inaugurated in 2018, but the work is expected to take many years. Traffic is gradually being transferred to the new airport. The construction work has been lined with accidents and strikes, which is presumed to be due to pressure on construction time.
Turkey started investing in tourism during the 1980s. Tourism revenues (as well as transfers from Turks with income in other countries) have been important to offset the fact that imports of goods have increased faster than exports. In 2018, the target was 40 million visitors from abroad and it was met, even with visits by foreigners counted. But the industry is sensitive to political unrest. A number of terrorist acts in 2015 and 2016 were targeted at tourist areas in Istanbul. Between autumn 2015 and summer 2016, Turkey was boycotted by Russian tour operators after a Russian fighter jet was shot down across the border to Syria, which may have cost Turkey billions in lost revenue. Turkey’s military intervention in northern Syria in the fall of 2019 has also worried travelers.
Since 1996 there has been a customs union with the EU, which means free trade in most goods. Trade in agricultural products, for example, is governed by separate agreements between Turkey and individual countries. Trade with the Arab world has increased since the Islamic Conservative AKP government came to power in 2002, but it is still insignificant compared to trade with the EU. Turkey is also investing heavily in new trade contacts in Africa, Asia and Latin America. China is now one of the country’s most important trading partners.
Important export goods are clothing and textiles, electrical equipment and electronics (including TV sets), vehicles, agricultural products (fruits, vegetables, wine), minerals including iron and steel. Almost half the exports go to the EU. Imports are dominated by machinery, fuels, iron and steel, plastics, vehicles (primarily passenger cars) and electrical and electronic equipment. 38 percent of the imports came from the EU in 2018, but the single most important importing country was Russia, where Turkey bought most of its natural gas.
More recently, political tensions have increased with Turkey led by Recep Tayyip Erdoğan and the United States by Donald Trump, and economic expressions have emerged despite both countries being part of the NATO military alliance. Trump’s decision to impose tariffs on Turkish steel, as well as imports from many other countries, is increasing pressure on the Turkish economy. Turkey also loses the duty of duty of exporting certain goods to the United States which it has benefited from as a developing country.
Figures on Turkey’s foreign trade have not been entirely reliable, due to “informal” exports and imports, including smuggling.
FACTS – FINANCE
GDP per person
US $ 9,311 (2018)
US $ 766 509 M (2018)
2.6 percent (2018)
Agriculture’s share of GDP
5.8 percent (2018)
Manufacturing industry’s share of GDP
19.1 percent (2018)
The service sector’s share of GDP
54.3 percent (2018)
15.7 percent (2019)
Government debt’s share of GDP
30.2 percent (2018)
US $ 454,725 M (2017)
US $ 174 599 M (2018)
US $ 216 412 M (2018)
– US $ 27,252 million (2018)
Commodity trade’s share of GDP
51 percent (2018)
Main export goods
clothing, food, textiles, metal products, transport equipment
Largest trading partner
Germany, Russia, China, USA, UK, Italy, France, Iraq
A referendum approves the direct election of the president
In a referendum, the government’s proposal endorses the president to be elected in general elections, not as so far elected by Parliament. The term of office shall be shortened from seven to five years, with the possibility of re-election.
AKP’s candidate becomes president
Foreign Minister Abdullah Gül is elected president since parliament and the Constitutional Court stopped his candidacy in the spring.
Murder of journalist arouses appearance
Journalist Hrant Dink is murdered. He is the editor of the Armenian- and Turkish-speaking weekly newspaper Agos and a spokesman for the small Armenian minority in Turkey. The murder provokes great outrage in the country and internationally.