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Turkey Economic Overview

Estimated GDP: $ 649.44 billion (2020)

GDP / capita: 7,658 USD (2020)

Human Development Rank (HDI): Rank 59 of 189 (2018)

Proportion of poverty (national poverty line): 9.2% (2018)

Distribution of income (Gini coefficient): 39.8 (2018)

Economic transformation index: Rank 50 (of 137) (2020)

Economic policy

From Ataturk to the 80’s

The Ottoman Empire was dependent on the European powers for industrial production. It had only a poorly developed textile manufacture (production of raw silk and cotton) and had to import numerous products, even food. Trade and handicrafts were in the hands of the non-Turkish Christian population group, whose know-how was lost after the wars of liberation and expulsions.

Ataturk initially promoted a liberal economic policy. The state only invested in the expansion of the infrastructure (railway network, ports, utilities, mining). Nevertheless, the economy did not really get going (1927: 155 factories and only 27,000 industrial workers) and so the Turkish state saw itself compelled to take on important economic tasks statistically. This was understood to mean the establishment of state-owned commercial enterprises in order to replace imports with their own productions in the long term. With the help of Russian foreign loans, state-owned companies were established that dealt with the production of sugar, textiles, paper, glass, ceramics, cement, chemical products, iron and steel.

This enabled the state to increase industrial production in the 1930’s.

In the 1950’s, agriculture experienced an upswing thanks to low-interest loans for agricultural products and the decrease with guaranteed prices. This led to an increase in the standard of living of the rural population, but made more and more workers redundant through mechanization.

Liberalization and opening to the world market

A radical change in economic policy is associated with the then Prime Minister Turgut Özal (1981-1993). He achieved an opening to the world market and accelerated rapprochement with the EU. Import bans were dismantled, export trading companies were set up, travel was eased and foreign investors were attracted. Liberalization led to an increase in export performance and to Turkey transforming from an agricultural country to an emerging country.

Another milestone for the economic upturn was Turkey’s accession to the customs union on January 1st, 1996. Linked to this was the removal of import bans, the liberalization of services (banks and insurance companies) and the harmonization of technical standards and regulations. This created a new export market for the EU and an increase in domestic demand and the export economy for Turkey. However, due to the rigid visa practice, many Turkish entrepreneurs find it difficult to gain access to the European market.

With the AKP, an economically liberal party has had government responsibility since 2001. Their policies temporarily led to an increase in economic growth to around 10% (2014: 3-4%) and a significant increase in the standard of living of the entire population. A new “green” entrepreneurship with an Islamic self-image has also emerged.

Economic data and trends

According to ezinereligion, since the economic crisis of 2009, Turkey can look back on steadily increasing economic growth. The upward trend gave Turkey a demand of between five and ten percent, which continues to this day. This was driven by massive government spending to promote consumption and investment while at the same time securing bank loans through government funds. Tax relief, price and interest subsidies should also stimulate the economy. An investment fund was set up to finance planned major projects. The 4% increase in private consumption also contributed to growth.

Time and again, however, short-term losses were recorded. In 2014, government measures to restrict credit temporarily dampened domestic demand by 5%. Politically induced turbulence (coup in July 2016, referendum in April 2017) and the current geopolitical and global risks also only caused minor difficulties for the Turkish economy. Growth of 7.5 percent was achieved again for 2017.

In 2018, turbulence emerged that hit domestic markets, companies and the population at a sensitive point: the decline in the value of their own currency. Inflation got out of hand because, on the advice of politicians, the Turkish central bank did not take any measures to support the lira for a long time. It was not until October 2018 that the key interest rate increase and other beneficial countermeasures were decided.

Further tendencies:

  • Chronically high current account deficit
  • Strong dependence on energy imports (more than 50% of the deficit)
  • Lack of efficiency in higher-quality economic sectors, partially limited global competitiveness, low local added value in production
  • Dependence on foreign capital flows (also due to the low savings rate: 13% GDP)
  • Rising unemployment rate: 15% (2017), in the southeast 25%
  • High proportion of illegal work and low proportion of women in gainful employment

Turkey was seen as an attractive market for foreign investment. After the coup, foreign investors reacted temporarily cautiously. Turkish companies are active in Europe and worldwide.

President Erdogan influences the central bank, which does not raise key interest rates. This has consequences for the Turkish lira and the socio-economic situation of the people in Turkey (3min20, German)

The Turkish currency crisis affects everyone: Citizens and companies (10min, German)

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