Turkey has a skilled workforce and good domestic consumption, which makes the country’s economy one of the most emerging in terms of GDP and economic strength.
Overview of Turkey’s economy
Turkey’s economy is a dynamic and diverse mixed economy characterized by a robust industrial and rapidly expanding services sectors. Over the past decade, the country has experienced significant GDP growth, averaging 5.4 percent between 2002 and 2022. A strong manufacturing base drives this growth, with key industries including textiles, motor vehicles, and electronics. The industrial sector remains a cornerstone of Turkey’s economy, contributing significantly to the country’s GDP.
In addition to manufacturing, Turkey is a major producer of agricultural products such as wheat, cotton, and tobacco. While smaller than industry and services, the agricultural sector plays a vital role in the country’s economy. Furthermore, Turkey’s tourism sector has seen remarkable growth, attracting over 40 million tourists in 2022. This influx of visitors has bolstered the services sector, contributing to the overall economic expansion.
Understanding Turkey’s GDP
Turkey is strategically situated at the intersection of Europe, Central Asia, and the Middle East. It has a sizable domestic market, advantageous demographics, and a highly qualified workforce. Although its economy’s industrial, manufacturing, and service sectors are quite diverse, agriculture still employs over 25 percent of its workforce. The country’s industrial and transport sectors rely heavily on fossil fuels, which presents challenges and opportunities for economic growth. Issues such lack of transparency, reliance on imported energy, high inflation, and external debt — despite its political stability and access to global investment — have limited Turkey’s potential for economic growth.
About 27 percent of the workforce is employed in the secondary sector, contributing 31.3 percent of the Turkey’s GDP. With manufacturing making roughly 22 percent of GDP, it is the nation’s primary industrial activity. The Turkish industry is led by the automobile and textile industries, with food items, basic and fabricated metal products, plastic products, chemicals, and electrical equipment being additional significant sectors. Turkey is the world’s fifth-largest exporter of textiles. Due to its growing production capacity, potential for export, and the inputs it supplies to other industries, Turkey’s iron and steel sector plays an essential role to the overall operation of the manufacturing sector. It’s manufactured exports, which made up 73.1 percent of all exports in 2022, hit an all-time high of $185.9 billion, as per the report by Credit Agricole Group.
What is Turkey’s GDP?
Turkey’s GDP expanded 4.5 percent year over year in 2023, compared to 5.5 percent in 2022. The IMF projects 3.1 percent GDP growth for Turkey in 2024. The Turkish Statistical Institute (TUIK), which the government of Turkey operates, reports that inflation averaged 65 percent. The unorthodox monetary policies of 2021 until mid-2023 caused surplus monetary supply, high demand, and supply restrictions, as per the report by U.S. Department of State.
The Central Bank of the Republic of Turkey (CBRT) raised the extremely negative policy interest rate in June 2023. In September 2023, the Turkish government released a medium-term program (MTP) for 2024-2026 to contain inflation and draw in foreign direct investment (FDI). Turkey is now susceptible to foreign economic shocks due to currency depreciation, inflation, significant current account deficits, and the anticipated $150 billion or more in damage caused by the 2023 earthquakes.
Turkey’s vast domestic market, advantageous demographics, competent labor, customs union agreement with the European Union, and strategic position all contribute to the country’s favorable business climate. Turkey’s FDI policy imposes few limitations on acquisitions by international companies and treats foreign investors in the same way as local ones. FDI equity capital inflows to Turkey decreased from $6.5 billion in 2022 to $5.6 billion in 2023.
Historical growth of Turkey’s GDP
According to Trading Economics, Turkey’s GDP averaged $309.96 billion between 1960 and 2023, touching a record low of $7.57 billion in 1960 and an all-time high of $1,108.02 billion in 2023. Turkey’s economy is the 17th biggest in the world, with a 2023 GDP of $1.024 trillion. It is a G20 and OECD member and is becoming a more significant official development aid (ODA) contributor. Between 2006 and 2017, Turkey’s high growth rates and ambitious reforms helped the nation reach the upper-middle income range and eliminate poverty.
Between 2002 and 2022, real GDP growth averaged 5.4 percent, resulting in a more than double increase in real income per capita. Rapid poverty reduction coincided with growth. In 2021, the poverty rate dropped by more than half, from nearly 20 percent in 2007 to 7.6 percent, as per a World Bank report. Turkey must overcome major obstacles in sustainability, poverty and inclusion, and economic resilience to maintain and advance its development. Reviving economic development is important in the post-COVID period, marked by a difficult macroeconomic environment and a decline in productivity since the beginning of the decade. Additionally, despite the ongoing economic boom, rising inequality has slowed the decline in poverty rates since 2016.
Key factors driving Turkey’s GDP
Several sectors contribute to Turkey’s economy and GDP; below are some of the key pointers:
Manufacturing and exports
A long-standing pillar of the Turkish economy has been manufacturing. Turkey, which has been among the top 20 markets for industrial production since the 1970s, shot up to 12th place in 2021. Manufacturing produced 18 percent of the nation’s jobs and 19 percent of its GDP in 2022. Because of its position, Turkey is a well-liked transit hub connecting Europe, Africa, the Middle East, and Asia. Goods can be swiftly carried by sea, air, road, or rail to most destinations owing to its center for air and sea shipping and its own domestic logistics network, making it an ideal place to be included in the architecture of a global supply chain.
In recent years, Turkey has risen to the top of the list of nations with favorable industrial environments, pro-business atmospheres, and infrastructure and tax laws. According to the World Bank’s Ease of Doing Business Index, Turkey reached number 33 in 2020. To promote the industry, Turkey has created 325 ‘organized industrial zones,’ or manufacturing centres, that provide adequate infrastructure, waste disposal systems, and logistics incentives.
With regard to exports, Turkey’s economy ranked 19th in the world in 2022 in terms of GDP, 29th in terms of total exports, 22nd in terms of total imports, 75th in terms of GDP per capita, and 41st in terms of economic complexity, according to the Economic Complexity Index (ECI).
Service sector, domestic consumption
The services sector plays a major role in Turkey’s economy, while agriculture and manufacturing make a limited contribution. Tourism, finance, construction, electronics, textiles, and more are the main economic sectors of the nation. In 2022, the service sector accounted for 51.74 percent of Turkey’s GDP, followed by industry (31.29 percent) and agriculture (6.48 percent). In 2023, however, the service sector accounted for 58 percent of Turkey’s GDP, followed by industry (20.8 percent) and agriculture (14.8 percent).
In June 2024, domestic consumption made up 60.4 percent of Turkey’s nominal GDP, up from 56.8 percent in the preceding quarter. With an average share of 61.1 percent, Turkey’s domestic consumption contribution to the nominal GDP ratio is updated every quarter and is accessible from March 1998 to June 2024. According to CEIC Data, the statistics peaked in March 2000 at 73.1 percent and fell to a record low of 54.6 percent in September 2018.
Government policy on FDI
Among OECD members, Turkey has one of the most lenient FDI laws. According to CBRT balance of payments statistics, Turkey received $5.6 billion in equity capital inflows from FDI in 2023, up from $6.5 billion in 2022. Additionally, Turkey received $1.9 billion in FDI through financial instruments and $3.6 billion in foreign real estate investments in 2023. Foreign investors withdrew $374 million from the Turkish market, increasing net FDI inflows to $10.6 billion from $13 billion in 2022.
The country encourages investment through incentive programs run by the Ministry of Industry and Technology and the Investment Office of the Presidency of the Republic of Turkey. Turkey’s regulatory climate is nevertheless business-friendly in many other areas. Investors can open a business in Turkey regardless of their country or place of residence. No sector-specific barriers hinder entry for international investors, which is against World Trade Organization (WTO) rules.
External trade and investment
Turkey’s external trade and investment landscape has evolved considerably over the past decade. The country has established strong trade relationships, with Germany, the UK, and the U.S. being its main export partners. On the import side, China, Germany, and the U.S. are the primary sources of goods. Turkey’s main exports include textiles, motor vehicles, and electronics, while machinery, electronics, and chemicals dominate its imports.
FDI has also played a crucial role in Turkey’s economic development. The country’s FDI stock is approximately $200 billion, with most investments from the European Union. Turkey attracts significant foreign investment despite a current account deficit of around 2 percent of GDP. However, the country’s gross external debt, around $400 billion, remains a concern for economic stability.
Read more | UK GDP: Growth trends and economic forecasts for 2024
Regional disparities
Significant regional disparities mark Turkey’s economic landscape. The western regions, particularly the Istanbul region, are more developed and economically vibrant than the eastern regions. Istanbul, as the most developed region, boasts a high GDP per capita and serves as the country’s economic hub. In contrast, the southeastern region lags behind, with a GDP per capita that is less than half of the national average.
Various factors, including infrastructure, education, and access to healthcare, influence these regional disparities. To address these imbalances, the Turkish government has implemented several policies to boost development in less-developed regions. Infrastructure, education, and healthcare investments are part of the broader strategy to reduce regional disparities and promote inclusive economic growth.
Turkey GDP in 2024: Current statistics
As of now, Turkey’s GDP is likely to touch $1,141 billion by the end of 2024, according to Trading Economics. The Turkish economy and industrialization have seen tremendous advancements during the last 20 years, and the nation has grown rapidly. Between 1999 and 2022, Turkey’s unemployment rate was at its lowest in 2000, 6.5 percent. By 2022, the unemployment rate had risen to 10 percent due to rising labor costs, inflation, and the current financial crisis. Turkey’s economy was anticipated to gradually improve after inflation reached its highest level in 2022 for the first time in over 20 years. Furthermore, the nation’s real GDP is anticipated to expand steadily over the next several years, as suggested by a Statista report. The United Nations has been involved in assessing the recovery and reconstruction needs, emphasizing the significant financial implications of the disaster.
Here is the sector-wise contribution to Turkey’s GDP in 2024:
| Industry | GDP |
|---|---|
| Manufacturing | 22.1% |
| Retail and wholesale | 13.5% |
| Transport and storage | 10% |
| Agriculture, forestry and fishing | 6.5% |
| Construction | 4.9% |
Impact of global trade and economic policies
Exports and domestic consumption have propelled Turkey’s economic development, with capital investments and private consumption driving growth in 2016 and 2017. A rise in global demand in 2021 increased exports by 25.1 percent. That resulted in the strongest G20 GDP growth of 11.4 percent and a 10 percent decrease in unemployment in 2022. Turkey’s economy, especially its commerce sector, saw significant structural changes between 2016 and 2022. After a pandemic-induced drop, exports of products increased to $213.6 billion in 2021, above the world average growth of $142.5 billion in 2016. According to a Wiley report, exports increased by 8.7 percent annually since 2016 to reach $235.3 billion by 2022.
Covid-19 and Turkey
Turkey implemented trade restrictions. That includes export limits and non-automatic licensing, in response to Covid-19 and global price volatility. These measures were often in line with WTO notifications. Since October 2022, ‘export taxes’ have been imposed on some goods. These are raw hides and hazelnuts, to solve domestic agricultural, environmental, and health problems.
Economic challenges
Despite its robust growth, Turkey’s economy faces several significant challenges. High inflation remains a persistent issue, with rates averaging around 10 percent per annum in recent years. This high inflation has eroded purchasing power and created economic uncertainty. Additionally, productivity growth has been relatively low. That is averaging around 2 percent per annum, which hampers long-term economic potential.
The fiscal deficit is another major challenge. That is standing at around 3 percent of GDP. This is higher than the EU average. Currently, at approximately 50 percent of GDP, public debt exceeds the EU average, raising concerns about fiscal sustainability. The banking sector faces its own issues, including high levels of non-performing loans and low profitability, which threaten financial stability.
The industrial sector, a key driver of Turkey’s economy, is grappling with high energy costs and low competitiveness. These challenges necessitate comprehensive policy measures to enhance productivity, stabilize inflation, and improve the overall economic environment. Addressing these issues is crucial for sustaining Turkey’s economic growth, and ensuring long-term prosperity.
Future projections for Turkey’s GDP
As one of the world’s most promising economies, Turkey’s GDP seems to have grown over the years. And in future, the country’s economy could grow further; below are some points:
Turkey economic growth outlook
According to a report by Statista, Turkey’s GDP is expected to grow by 3.19 percent in 2025, 3.28 percent in 2026, 3.45 percent in 2027, 3.45 percent in 2028 and 3.49 percent in 2029. Turkey earned a spot in the Group of 20. That is an index of the 20 most significant economies in the world. It is regarded as an emerging market and one of the recently industrialized nations based on economic norms. Turkey’s expansion, particularly during the most recent global financial crisis, is partly responsible for its economic importance. While nations worldwide found it difficult to expand, much less keep their economies balanced, Turkey had a comparatively high yearly growth rate in its GDP. Significant progress was also made in Turkey’s financial sector. The major among them being the country’s inflation rate, which dropped to levels below the financial crisis and even the lowest in 10 years.
Furthermore, despite being one of the fastest-growing economies in the world and Europe and a rapidly expanding population, Turkey has managed to keep its unemployment rate constant during the last 10 years, except for 2009. Nevertheless, Turkey’s capable leadership contributed to bringing the overall unemployment rate down to single digits for the first time in many years, even if there was a notable increase in unemployment.
Banking sector looks stable
After Turkey adopted more traditional macroeconomic policies following last year’s presidential election, Fitch Ratings changed its outlook on the Turkish banking industry from ‘neutral’ to ‘improving’ due to decreased external financing pressures and threats to macro and financial stability.
Growing investor confidence in the nation’s policy framework has led to a decrease in dollarization, a rise in the Central Bank of the Republic of Turkiye’s (CBRT) foreign currency reserves position, and better bank access to external finance. As a result, banks’ forex swaps with the CBRT, which make up a sizable portion of the industry’s foreign-currency liquid assets, have drastically declined. The Turkish lira projections for the remainder of 2024 and 2025 should be improved by all of these factors, which should continue to support financial stability.
Frequently Asked Questions (FAQs)
What is Turkey’s current GDP?
According to a report by Trading Economics, Turkey’s GDP is expected to reach $1,141 billion by the end of 2024.
How has Turkey’s GDP grown over the last decade?
Over the years, Turkey’s GDP growth has been influenced by several factors, including currency volatility, monetary policy challenges, and political unpredictability. Below are some highlights of Turkey’s GDP growth over the last decade:
- 2009: A record low of -4.80 percent
- 2018: A sharp currency devaluation slowed the economy
- 2020: The economy grew by 1.9 percent despite the Covid-19 pandemic
- 2021: An all-time high of 11.40 percent growth
- 2022: A growth rate of 5.5 percent
- 2023: An expansion of 5.1 percent
- 2024: A projected growth of 3.2 percent
What are the predictions for Turkey’s GDP in the next few years?
According to a report by Statista, Turkey’s GDP is expected to grow by 3.19 percent in 2025, 3.28 percent in 2026, 3.45 percent in 2027, 3.45 percent in 2028 and 3.49 percent in 2029.
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