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Turkey: Country Report
Overview:
The Republic of Turkey was founded in 1923 from the Anatolian remnants of the defeated
Ottoman Empire. Turkey joined the UN in 1945, and in 1952 it became a member of NATO1.
In 1964, Turkey became an associate member of the European Community. The country is
also a founding member of the OECD and the G-20 major economies. During the first six
decades of the Republic, between 1923 and 1983, Turkey mostly adhered to a quasistatist approach with strict government planning of the budget and government-imposed
limitations over private sector participation, foreign trade, flow of foreign currency, and
foreign direct investment2. However, in 1983 Prime Minister Turgut Özal introduced a
series of reforms designed to move the economy from a statist, insulated system to more
private-sector, market-based. In addition, during the past decade, Turkey has carried out
many of these reforms to strengthen its democracy and economy; it began accession
membership talks with the European Union in 20053.
CIA World Report 2012: Background Turkey https://www.cia.gov/library/publications/the-worldfactbook/geos/tu.html
2 Wikipedia: Turkey Profile http://en.wikipedia.org/wiki/Turkey#Economy
3 CIA World Report 2012: Background Turkey https://www.cia.gov/library/publications/the-worldfactbook/geos/tu.html
1
The Kurdish-Turkish conflict has taken over the majority of Turkey’s time and energy, with
more than 40,000 lives claimed. Peace talks were launched in 2012, but conflicts resumed
in 2015 following the Suruc bombing. Several protests have erupted throughout the years
sparked by anti-government dissent including an unsuccessful coup attempt tied to oust
the government in July 2016.
Role in the Global Economy:
According to the IMF, Turkey plays the role of an emerging market economy and is largely
developed, making it one of the world's newly industrialized countries. The country is a
large, middle-income country with relatively few natural resources. It is also a cultural
center linking the economies of Europe, Asia, the Middle East and North Africa. Its economy
is currently in transition from a high degree of reliance on agriculture and heavy industry
to a more diversified economy with an increasingly large and globalized services sector4.
Turkey's largely free-market economy is increasingly driven by its growing industry and
service sectors, although its traditional agriculture sector still accounts for about 25% of
employment5.
Turkey has gradually opened up its markets through economic reforms by the reduction of
government controls on foreign trade and investment, the privatization of publicly owned
industries, and the liberalization of many sectors to private and foreign participation has
continued amid political debate. Prime Minister and then President Turgut Ozal began to
open up the economy in the 1980s, leading to the signing of a customs union with the
European Union in 19956. In the 1990s, Turkey's economy suffered from a series of
coalition governments with weak economic policies, leading to high-inflation boom-andbust cycles that culminated in a severe banking and economic crisis in 2001, a deep
economic downturn (GNP fell 9.5% in 2001), and an increase in unemployment7. Turkey's
economy recovered strongly from the 2001 recession thanks to good monetary and fiscal
US State Department Background notes- Turkey: http://www.state.gov/r/pa/ei/bgn/3432.htm
World Report 2012: Background Turkey https://www.cia.gov/library/publications/the-worldfactbook/geos/tu.html
6 US State Department Background notes- Turkey: http://www.state.gov/r/pa/ei/bgn/3432.htm
7 Ibid
4
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policies and structural economic reforms made with the support of the IMF and the World
Bank.
Since the economic crisis of 2001, inflation has fallen to single-digit numbers, investor
confidence and foreign investment has soared, and unemployment has fallen. In addition,
growth was averaging more than 6% annually until 20088. Global economic conditions and
tighter fiscal policy caused GDP to contract in 2009, but Turkey's well-regulated financial
markets and banking system helped the country weather the global financial crisis and GDP
rebounded strongly to 8.2% in 2010, as exports returned to normal levels following the
recession9. An aggressive privatization program has reduced state involvement in basic
industry, banking, transport, and communication, and an emerging cadre of middle-class
entrepreneurs is adding dynamism to the economy and expanding production beyond the
traditional textiles and clothing sectors10. The automotive, construction, and electronics
industries, are rising in prominence in the world and have surpassed textiles within
Turkey's export list. Oil began to flow through the Baku-Tbilisi-Ceyhan pipeline in May
2006, marking a major milestone that will bring up to 1 million barrels per day from the
Caspian to market11.
EU Accession:
Turkey adopted the EU's Common External Tariff regime in 1963, effectively lowering
Turkey's tariffs for third countries, including the United States. Turkey and the thenEuropean Economic Community (EEC) entered into an Association Agreement in December
1964. Turkey and the EU also formed a customs union beginning January 1, 199612. Then,
in 1999 the European Council granted the status of candidate country to Turkey, and
accession negotiations with Turkey were opened in October 200513. Accession talks include
a process of adopting the body of EU law called the acquis communautaire One of the key
CIA World Report 2012: Background Turkey https://www.cia.gov/library/publications/the-worldfactbook/geos/tu.html
9 Ibid
10 Ibid
11 Ibid
12 US State Department Background notes- Turkey: http://www.state.gov/r/pa/ei/bgn/3432.htm
13 Ibid
8
stumbling blocks to opening new chapters is that Turkey has yet to fully implement the
Ankara Protocol, which requires normalizing bilateral relations with EU member Cyprus,
which Turkey has said it will not do until the Greek and Turkish Cypriot communities on
the island are reunited14.
Economic Indicators:

Turkey has the world’s 18th largest GDP-PPP and 17th largest nominal GDP15.

Below is a chart depicting the quarterly GDP growth rate from 2013 to January
2016.16

Turkey's labor force is divided by 25.5% in the agricultural sector, 26.2% in the
industry sector, and 48.4% in the services sector17.

Although the public sector debt to GDP ratio has fallen to roughly 40% and
continued strong growth has pushed inflation to the 8% level, it has worsened an
already high current account deficit18.
Ibid
The World Bank World Development Indicators Database. Gross Domestic Product 2010:
http://siteresources.worldbank.org/DATASTATISTICS/Resources/GDP_PPP.pdf
16 http://www.tradingeconomics.com/turkey/gdp-growth
17 CIA World Fact Book: https://www.cia.gov/library/publications/the-world-factbook/geos/tu.html
18 Ibid
14
15

While Turkey’s long-term economic prospects are bright, the government is
working to limit growth of its current account deficit, which grew to 10% of GDP in
2011; and reined in inflation of nearly 10%.19

Unemployment was 10.2% in 2007 and rose to 14% in 2009 because of the global
economic crisis. Since then though, it has fallen to 10.3% and is expected to continue
to decrease20. In 2014, however, unemployment rate was 10%, and by 2015 it rose
to 10.4%. Country comparison to the world, Turkey is at 118 from least
unemployment rate to the highest.21

Below is a chart depicting the monthly unemployment rate of turkey in between
March 2015 and February 2016.22

Several gas pipelines projects are moving forward to help transport Central Asian
gas to Europe through Turkey, which over the long term will help address Turkey's
dependence on imported oil and gas to meet 97% of its energy needs23.

Global economic conditions and tighter fiscal policy caused GDP to contract in 2009,
but Turkey's well-regulated financial markets and banking system helped the
US Department of State, Backgroud notes ‘Turkey’: http://www.state.gov/r/pa/ei/bgn/3432.htm
World Fact Book: https://www.cia.gov/library/publications/the-world-factbook/geos/tu.html
21 CIA World Fact Book: https://www.cia.gov/library/publications/the-worldfactbook/rankorder/2129rank.html#tu
22 Trading Economics: http://www.tradingeconomics.com/turkey/unemployment-rate
23 CIA World Fact Book: https://www.cia.gov/library/publications/the-world-factbook/geos/tu.html
19
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country’s GDP rebound strongly to 8.2% in 2010, as exports returned to normal
levels following the recession24.

Turkey’s estimated GDP was $722.2 billion (2015 est.) 25

In 2014 Turkey had the current account balance of -$46.53 billion, and in 2015
Turkey had a current account balance of -$32.69 billion.26

Imports for 2015 totaled US$204.3 billion.27

Exports for 2015 totaled US$153.3 billion.28
Economic Structure:

In 2014, the Turkish services sector contributed 64.9 percent to GDP while the
industry sector accounted for 27.1 percent and agriculture, 8.0 percent.29

Turkey does a significant portion of its trade with the European Union, specifically
with Germany (9.6% of exports, 9.2% imports), United Kingdom (6.3% exports),
and France (4.1% exports). Iran, Iraq, China, and the US also are trading partners
with Turkey but the country’s principal trading partners are Germany and Russia
(10.4 imports). 30

Turkey’s economy is a mix of modern industry and commerce, along with the
traditional agriculture sector. Turkey has a vigorous and developing private sector,
and the state is a major contributor to industry, banking, transport and
communication.

Primary imports include machinery, chemicals, semi-finished goods, fuels, and
transport equipment

Primary exports are apparel, foodstuffs, textiles, metal manufactures, and transport
equipment
Ibid
CIA World Fact Book: https://www.cia.gov/library/publications/the-world-factbook/geos/tu.html
26 CIA World Fact Book: https://www.cia.gov/library/publications/the-world-factbook/geos/tu.html
27 CIA World Fact Book: https://www.cia.gov/library/publications/the-world-factbook/geos/tu.html
28 CIA World Fact Book: https://www.cia.gov/library/publications/the-world-factbook/geos/tu.html
29 World Bank:
http://databank.worldbank.org/data/reports.aspx?source=2&country=TUR&series=&period=
30 CIA World Fact Book: https://www.cia.gov/library/publications/the-world-factbook/geos/tu.html
24
25
 Turkey’s economic freedom score is 62.1, making its economy the 79th freest in the
2016 Index. Its score is 1.1 points lower than last year, reflecting explosive growth
in government spending mitigated to some extent by a notable improvement in
financial freedom. Turkey is also ranked 34th out of 43 countries in the Europe
region31.
Turkey’s Economic Freedom
Political Considerations:
 Today, Turkey is a democratic, secular, unitary, constitutional republic with an
ancient cultural heritage that is traditionally Muslim oriented.
 The government is divided into the President of the Republic (currently Abdullah
Gul) that is elected for five-year terms by direct elections; the executive power
which includes the Prime Minister and the Council of Ministers; the legislative
power which is the unicameral parliament- the Grand National Assembly of Turkey;
and judiciary power which includes a Constitutional Court32
 The Turkey legal system is liberal in comparison to the rest of the Arab world.
There is universal suffrage for both sexes and it has a multiparty system.
 However, human rights in Turkey have been the subject of much controversy and
international condemnation. Between 1998 and 2008 the European Court of
Human Rights made more than 1,600 judgments against Turkey for human rights
violations, particularly the right to life and freedom from torture. Women's rights
31
32
2016 Index of Economic Freedom http://www.heritage.org/index/country/turkey
Wikipedia, Turkey: http://en.wikipedia.org/wiki/Turkey#Politics
and press freedom have also attracted controversy. Turkey's human rights record
continues to be a significant obstacle to future membership of the EU33.
 Transnationally, Turkey has territorial disputes with Greece in the Aegean Sea and
the status of north Cyprus remains in question. In addition, Syria and Iraq are
protesting Turkey’s hydrological projects in the Euphrates waters.34
Attractions:
 Strategic Location: Known as the place where East and West come together,
Turkey’s location places it as the crossroad of continents. It is centrally located in
the landscape known as “Afro-Eurasia” serving as a gateway to Europe, Central
Asia, the Middle East and the Pan Euro-Mediterranean region. This gives businesses
access to over 1 billion consumers explaining why companies including Microsoft,
Coca-Cola, GE, Proctor & Gamble and HP have chosen Turkey as their regional
operational headquarters.35
 Emerging Economy: Having the highest growth rate among OECD countries for the
past six years, Turkey is a rising star of the global economy. The GDP of Turkey
established it as the 15th largest economy in the world and 6th in the EU. Turkey
has attracted more than 18,000 foreign capital establishments.36
 Liberal Business Climate: Turkey’s corporate tax rate is a flat 20%, one of the most
competitive tax rates in the world. The average tariff for industrial goods is only
4.2%, which is lower than many emerging countries. Because of Turkey’s Customs
Union agreement with the EU, Turkey’s trade regulations are compatible with those
of the EU. Furthermore, the Turkish government has been implementing structural
reforms in public and private sectors to make the trading and investment climate
more business friendly.37
Ibid
CIA World Fact bookhttps://www.cia.gov/library/publications/the-world-factbook/geos/tu.html
35 Turkish Trade and Business Portal: http://www.turkishtradechicago.org/whyTurkey.html
36 Ibid
37 Ibid
33
34
Trouble Spots:
 Foreign Investment Concerns: Turkey has taken steps to improve its investment
climate through administrative streamlining, an end to foreign investment
screening, and strengthened intellectual property legislation. However, a number of
disputes involving foreign investors in Turkey and certain policies, such as high
taxation and continuing gaps in the intellectual property regime, inhibit investment.
Turkey's relatively high current account deficit, uncertainty related to monetary
policy-making, and political turmoil within Turkey's neighborhood leave the
economy vulnerable to destabilizing shifts in investor confidence.38
 Ease of Doing Business: Turkey is ranked 73 in the World Bank Group’s Ease of
Doing Business out of 183 countries39. The Republic of Turkey is a very complex
and challenging market that requires adaptability and persistence. Turkey is a
medium developed country and a business should expect to run into some of the
same challenges when dealing with a country of this status.
 Corruption: According to the Corruption Perceptions Index, Turkey is ranked 55 in
2016. 40 This means that although Turkey is growing and improving in all ways,
corruption is still a problem and can be an obstacle for the economy to grow to its
full potential.
Acknowledgements:
Research and Data Development Provided by: Gabriella Morrone, Research
Assistant Intern, under the Supervision and Coordination of: Dr. Gerard Janco,
President of Eurasia Center/EBC. Updated November 2016.
CIA World Fact bookhttps://www.cia.gov/library/publications/the-world-factbook/geos/tu.html
The World Bank Ease of Doing Business: http://www.doingbusiness.org/data/exploreeconomies/turkey/
40 World Bank Group Doing Business: http://www.doingbusiness.org/data/exploreeconomies/turkey/
38
39