Is a founding member of the
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Economy of Turkey
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Economy of Turkey Turkey is a founding member of the OECD (1961) and G20 (1999) Turkey has an upper-middle income mixed-market emerging economy.[37] As of 2023, Turkey's economy is the 19th-largest in the world by nominal GDP, and the 11th-largest by PPP. The country is among the world's leading producers of agricultural products, textiles, motor vehicles, transportation equipment, construction materials, consumer electronics and home appliances. Turkey's nominal GDP peaked at $1.029 trillion in 2023,[6] while its nominal GDP per capita peaked at $12,489 in 2013.[38][39] Turkey's GDP (PPP) peaked at $3.573 trillion in 2023,[6] while its GDP (PPP) per capita peaked at $41,412 in 2023.[6] The declining value of the Turkish lira, especially during the 2018–2022 Turkish currency and debt crisis, had a significant impact on the recent decrease in the country's USD-based nominal GDP figures.[38] High inflation continues to be a problem in the early 2020s.[40] Over the past 20 years, there have been major developments in the financial and social aspects of Turkey's economy, such as increases in employment and average income since 2000.[41] Turkey has recently slowed down in its economic progress, due to considerable changes in external and internal factors, as well as a reduction in the government's economic reforms.[41] Environmentalists have argued that the economy is excessively dependent on the construction and contracting sector.[42] President Recep Tayyip Erdoğan's unorthodox monetary policy increased inflation and devalued the currency in recent years.[43] Macroeconomic trends[edit] See also: 2001 Turkish economic crisis and 2018–2023 Turkish currency and debt crisis
According to Eurostat data, Turkish GDP per capita adjusted by purchasing power standards stood at 64% of the EU average in 2018.[44] Turkey's labour force participation rate of 61.5% is by far the lowest of the OECD states which have a median rate of 78%.[45] 2017 was the second consecutive year that saw more than 5.000 high net-worth individuals (HNWIs, defined as holding net assets of at least $1 million) leaving Turkey, reasons given as government crackdown on the media deterring investment, and loss of currency value against the U.S. dollar.[46] A longstanding characteristic of the Turkish economy is a low savings rate.[47] Since under the government of Recep Tayyip Erdoğan, Turkey has been running huge and growing current account deficits, reaching $7.1 billion by January 2018, while the rolling 12-month deficit rose to $51.6 billion,[48] one of the largest current account deficits in the world.[47] The economy has relied on capital inflows to fund private-sector excess, with Turkey's banks and big firms borrowing heavily, often in foreign currency.[47] Under these conditions, Turkey must find about $200 billion a year to fund its wide current account deficit and maturing debt, always at risk of inflows drying up, having gross foreign currency reserves of just $85 billion.[49] Turkey has been meeting the "60% Maastricht criteria" of the EU for government debt stock since 2004.[citation needed] Similarly, from 2002 to 2011, the budget deficit decreased from more than 10% to less than 3%, which is one of the EU's Maastricht criteria for the budget balance.[50] In January 2010, International credit rating agency Moody's Investors Service upgraded Turkey's rating one notch.[51][52] In 2012, credit ratings agency Fitch upgraded Turkey's credit rating to investment grade after an 18-year gap,[53] followed by a ratings upgrade by credit ratings agency Moody's Investors Service in May 2013, as the service lifted Turkey's government bond ratings to the lowest investment grade, Moody's first investment-grade rating for Turkey in two decades and the service stated in its official statement that the nation's "recent and expected future improvements in key economic and public finance metrics" was the basis for the ratings boost.[54][55] In March 2018, Moody's downgraded Turkey's sovereign debt into junk status, warning of an erosion of checks and balances under Recep Tayyip Erdoğan.[56] In May 2018, credit ratings agency Standard & Poor's cut Turkey's debt rating further into junk territory, citing widening concern about the outlook for inflation amid a sell-off in the Turkish lira currency.[57] Share prices in Turkey nearly doubled over the course of 2009.[58] On 10 May 2017, the Borsa Istanbul (BIST-100 Index), the benchmark index of Turkey's stock market, set a new record high at 95,735 points.[59] As of 5 January 2018, the Index reached 116,638 points.[60] However, in the course of the 2018 Turkish currency and debt crisis,[61][62] the index dipped back below 100.000 in May.[63] In early June, the BIST-100 Index dropped to the lowest level in dollar terms since the global financial crisis in 2008.[64] In 2017, the OECD expected Turkey to be one of the fastest growing economies among OECD members during 2015–2025, with an annual average growth rate of 4.9%.[65] In May 2018, Moody's Investors Service lowered its estimate for growth of the Turkish economy in 2018 from 4% to 2.5% & in 2019 from 3.5% to 2%.[66] According to a 2013 Financial Times Special Report on Turkey, Turkish business executives and government officials believed the quickest route to achieving export growth lies outside of traditional western markets.[67] While the European Union used to account for more than half of all Turkey's exports, by 2013 the figure was heading down toward not much more than a third.[67] However, by 2018 the share of exports going to the EU was back above fifty percent.[68] Turkish companies' foreign direct investment outflow has increased by 10 times over the past 15 years, according to the 2017 Foreign Investment Index.[69][70][71] With policies of Recep Tayyip Erdoğan fuelling the construction sector, where many of his business allies are active,[72] Turkey as of May 2018 had around 2 million unsold houses, a backlog worth three times average annual new housing sales.[73] The 2018 Turkish currency and debt crisis ended a period of growth under Erdoğan-led governments since 2003, built largely on a construction boom fueled by easy credit and government spending.[74] In 2018, Turkey went through a currency and debt crisis, characterised by the Turkish lira (TRY) plunging in value, high inflation, rising borrowing costs, and correspondingly rising loan defaults. The crisis was caused by the Turkish economy's excessive current account deficit and foreign-currency debt, in combination with the ruling Justice and Development Party's (AKP) increasing authoritarianism and President Erdoğan's unorthodox ideas about interest rate policy.[75][49][76] On 10 August 2018, Turkish currency lira nosedived following Donald Trump's tweet about doubling tariffs on Turkish steel and aluminum that day.[77] The currency weakened 17% that day and has lost nearly 40% of its value against the dollar till that time. The crash of the lira has sent ripples through global markets, putting more pressure on the euro and increasing investors' risk aversion to emerging-market currencies across the board.[77] On 13 Aug., South Africa's rand slumped nearly 10%, the biggest daily drop since June 2016. Lira crisis spotlighted deeper concerns about the Turkish economy that have long signaled turmoil long ago.[77] By the end of 2018, Turkey went into recession. The Turkish Statistical Institute claimed that the Turkish economy declined by 2.4% in the last quarter of 2018 as compared to the previous quarter. This followed a 1.6% drop the previous quarter.[78] Lira shrank down to 30% against the US dollar in 2018.[79] In May 2019, European Bank for Reconstruction and Development (EBRD) released an economic outlook in which it is reported that Turkey's economy will probably see a gradual recovery of growth to around 2.5 percent in 2020.[80] According to official data in December 2022, Turkey's annual inflation rate rose to a 24-year high of 85.51% in October. This was slightly below expectations after the central bank cut interest rates despite rising prices. Inflation has surged since the lira collapsed last year after the central bank began cutting rates in an easing cycle long sought by President Tayyip Erdogan.[81] The structure of Turkey's GDP by sectors.[82] GDP per capita (PPP) of Turkey vs other emerging economies. The data is retrieved from World Bank Public debt of the six major European countries between 2002 and 2009 as a percentage of GDP Turkey expected to increase its GDP in long term due to population growth and urbanization. Data[edit] Change in per capita GDP of Turkey, 1913–2018. Figures are inflation-adjusted to 2011 International dollars The following table shows the main economic indicators from 1980 to 2021 (with IMF staff estimates in 2022–2027). Inflation below 10% is in green.[83]
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