The Economy of Turkey

The Economy of Turkey

Economy of Turkey

Turkey’s primarily free-market economy is driven by industry and, growing service industries, but the agriculture sector still employs approximately 25% of the country’s workforce. Within Turkey’s export mix, the automobile, petrochemical, and electronics industries have grown in significance and overtaken the traditional clothing and textiles sectors.

According to the CIA World Factbook, Turkey’s recent period of political stability and economic vitality has given way to internal uncertainty and security worries, which are causing financial market volatility and impacting the country’s economic prospects.[1]

Government policies now prioritize populist expenditure initiatives, while fundamental economic changes are being implemented slowly. The Turkish government is becoming more engaged in some important industries, and it has utilized economic institutions and regulators to pursue political opponents, eroding private sector trust in the legal system.

Three credit rating agencies lowered Turkey’s sovereign credit ratings between July 2016 and March 2017, citing worries about the rule of law and the speed of economic reforms.[2]

Turkey is still heavily reliant on imported oil and natural gas, but it’s also working to expand its energy connections with a wider range of foreign partners and to enhance the use of indigenous energy sources such as; renewables, nuclear power, and coal. The joint Turkish-Azerbaijani Trans-Anatolian Natural Gas Pipeline is making progress in increasing Caspian gas transit to Turkey and Europe, and when finished, it will assist Turkey to diversify its imported gas supplies.

Turkey’s Economy: Gross Domestic Product

By the end of 2018, the Turkish economy’s growth rate had slowed substantially to 2.6 percent, down from 7.4 percent in 2017. As per data published by the Turkish Statistical Institute in March 2019, this was the result of a 3 percent contraction in the previous quarter due to a decline in the value-added of the construction sector of 8.7%, the industrial sector of 6.4 percent, the agricultural sector of 0.5 percent, and the services industry of 0.3 percent.

Related Article: Importing and Exporting Agricultural Products in Turkey.

Gross domestic product (GDP) dropped to $784.1 billion in 2018 from $851.5 billion the previous year. GDP was $184.9 billion in the fourth quarter of 2018, the lowest level since the first quarter of 2017 when it was $175.9 billion, and GDP per capita was around $960,000 in 2018.[3]

Turkey’s International Market Position

Turkey was placed 53rd out of 137 nations in the 2017-2018 Global Competitiveness Index, down two places from 2016-2017 but still higher than the record low of 43rd in 2012. The strongest improvements to the newest technology, as well as mobile broadband connections, are anticipated to rise from 51% of the population in 2015 to 67 percent of the population in 2017.[4]

Turkey must strengthen its institutional structure, continue to eliminate stringent labor market restrictions and increase the efficiency and stability of its financial markets to go forward. Turkish exports benefited from the lira’s depreciation in 2017, while the government boosted domestic demand by tightening monetary and fiscal policy.

Turkey’s Transportation Infrastructure

Turkey focused on railway development throughout the Hamidian period (1876-1909) and the Kemalist period (1922-1945), with a total length of 10,900 kilometers, placing the country 23rd in the world in this sector. Furthermore, Turkey has prioritized roads and motorways over trains since the 1950s, with 65,049 kilometers of roads in 2012, including 2,119 kilometers of highways, 31,372 kilometers of trunk roads, and 31,558 kilometers of minor roads. Many new airports were built between 1990 and 2000; in 2010, there were 99 operational airports in Turkey.

Investment decisions in the road and air sectors will continue in the coming decades, but the P.M. Erdogan‘s government appears to want to rebalance its infrastructure policy and build at least 10,000 kilometers of high-speed railways, with the help of Chinese companies in particular, according to the Ministry of Transport. The building of double-track railroads between Ankara and Istanbul, and, Ankara and Konya is presently underway. Istanbul has become an “infinite city” in the infrastructure sector, where even the finished third bridge connecting Europe and Asia doesn’t solve the complex traffic problem.

Turkey’s Industry

Steel/metallurgy, textile and apparel, petroleum goods, food, and automotive employ 19.9% of the Turkish workforce. Although the Istanbul, Kocaeli, Izmit and the Cukurova plain (with Adana as its regional capital), and the Izmir region remain the three traditional industrial areas, many other regions, from Kayseri to Gaziantep, and from Adiyaman to Denizli, have emerged as centers of manufacturing output in the last two decades.

Turkey’s Construction Industry

Rapid urbanization in recent decades, as well as regional changes from 1980 to 1990 (e.g., the Iraq-Iran War and the Soviet Union’s demise), allowed Turkey’s construction sector to expand abroad and gain prominence in the world arena. Ankara, at the heart of Turkey’s highway and railway infrastructures, exemplifies how infrastructure development has benefitted the building industry, which has built enormous cities. Construction of airport facilities in Turkey and its environs, notably in Arbil/Hewler, Iraqi Kurdistan, has benefitted the construction sector, which employs 6.33 percent of the working force in Turkey.

Earthquakes in the Marmara coast (Izmit, 1999) and Van (2011) showed the degree of corruption in the construction business, as well as the thirst for money, a lack of efficient and real government control, and poor building quality. Most of the structures devastated by the earthquake in Istanbul (which killed approximately 20,000 people) were home to lower-middle-class individuals who had put their life savings into the freshly erected buildings.

Trade and Banking in Turkey

The expansion of hypermarkets during the 1980s, the government’s encouragement of the establishment of local banks or branches of international financial institutions, and the proliferation of industrial production hubs all contribute to Turkey’s dense commercial and financial networks. In the late 2010s, it was expected that around 150 American-style retail malls would be built in Istanbul. Because of its dynamism, the tertiary sector has become the country’s most important sector, employing over half of the workforce.

Turkey has 48 banks, comprising 31 retail banks (three public, eleven private, and sixteen international), 13 development and investment banks, and four participation cooperative banks. There are a total of 9,712 branches and 181,588 staff working for these banks. Ziraat Bankasi (Agricultural Bank), Is Bankasi (Labour Bank), Akbank (White Bank), and Garanti Bank (Guarantee Bank) are the major banks. Turkey, which is classified as an emerging country and is undergoing economic changes, was mostly untouched by the financial crisis of 2008-2012.[5]

Related Article: How to Open a Bank Account in Turkey as a Foreigner?

Turkey was relatively immune to the global shock due to the strength of local demand and the severe reorganization of the financial sector following the 2000-2001 crisis, but many analysts see the pause as a signal of impending storms in the Turkish economy. The foreign-trade imbalance rose from 5% to 10% of GDP between 2005 and 2010, and growth was fueled by easy consumer access to credit cards, a kind of spending that may lead to a disaster comparable to the subprime-mortgage crisis.

According to the Turkish Bank Association, the number of credit card users grew from 3,735,000 to 5,136,100 between 2007 and 2011, and credit card spending increased from 16.5 percent of GDP in 2007 to 22 percent over the next five years. In May 2012, consumer debt was $95 billion.

Tourism in Turkey

Tourism was predicted to contribute $10 billion in revenue in 2012. Turkey’s domestic tourism industry is increasing, yet the majority of visitors are from outside the country. Foreign tourists climbed from less than 10 million in 1998 to 31 million in 2011, resulting in a net profit of $23 billion.

Informal Sector in Turkey

Although research on Turkey’s informal economy is conflicting and untrustworthy, multiple variables indicate that it plays a significant part in the country’s economy. Family structures remain strong, resulting in women’s and children’s unpaid labor. “Hemsehrilik” (solidarity amongst individuals from the same city or region who commonly congregate in the same neighborhood in their new home) relationships are still strong and help to the micro-structuring of the economy.

Similarly, while fast urbanization is currently under control, it has created places that are largely beyond the state’s jurisdiction in recent decades. Finally, mafia-like economic organizations wield enormous power in some areas, such as cross-border trade and industries that rely heavily on subcontracting.

Given all of these variables, economist Osman Altug estimated that one-third of the labor force (about 5 million people) worked in the informal sector at the start of the 1990s, with earnings occasionally exceeding 50% of the gross national product (GNP). At the start of the millennium, the TISK (Turkish Confederation of Employers’ Unions) projected that 1,700,000 individuals worked in the informal sector.

Turkey’s Regional Development

In Turkey, regional disparities have long existed: Istanbul and its nearby cities, particularly Kocaeli (Izmit), have always reaped the lion’s share of corporate and state investment. With a combined population of 17 million people (registered and documented, undocumented, and unregistered could be much more), these two cities account for 26.2 percent of the country’s GDP. Diyarbakir, a city the same size as Kocaeli (1,518,958), contributes 1.1 percent to the GDP. Cities like Bitlis (population 228,767) and Mus and Sirnak (population over 400,000 apiece) contribute less than 0.1 percent of the GDP.[6]

Related Article: Opening a Business in Turkey.

Since the 1960s, the State Planning Organization has worked to rectify these disparities. The state established a new development program in the 2000s with the construction of “big municipalities” and new urban entities, followed by the establishment of Regional Development Agencies, which benefitted the regions and provinces, but the results were often disappointing.

The cases of Diyarbakir and Urfa demonstrate how policies are not implemented due to a lack of people, financial, and technical resources. The findings were mixed: in certain Kurdish areas, for example, per capita income is one-tenth that of metropolitan cities in western Turkey. While central Anatolia benefits from its closeness to the Aegean and Mediterranean regions, as well as the growth of new industrial cities, the Black Sea shores, except Trabzon, remain neglected.

Work and Migration in Turkey

Turkey has a working force of 46.9 million people, 24.5 million of whom are women (official sources estimate the participation of women in work at only 26 percent.) 3.5 million people are unemployed, and 500,000 young people start looking for work each year. According to research conducted by Koc University in Istanbul, young people have a tough time getting their first job, especially in metropolitan areas. Thus, this is negatively impacting the economy of Turkey.[7]

Agriculture’s proportion of the labor market fell from 36 percent (7.7 million) in 2000 to 24 percent (5.2 million) in 2009, according to another research by the pro-government think group SETA. In rural regions, 53% of people between the ages of 20 and 24 were able to obtain work, compared to 35% in urban areas.

Labor emigration has long been a problem in Turkey, but it has now been stabilized, if not reversed. Turkish nationals and their descendants are projected to number four million throughout Europe, the United States, and Australia, accounting for more than 5% of Turkey’s population. Many highly skilled third-generation Turkish immigrant professionals are returning to Turkey from Germany to seek a career, according to the vice head of the Turkish-German Chamber of Commerce and Industry, reversing the migration to Europe that began in the 1960s.[8,9]

Internal migration continues, even if the rush to the western El Dorado is waning. According to the SETA research, approximately 68 percent of wage workers live in Istanbul, Eastern Marmara, and the Aegean region, which explains the ongoing movement of labor from the rest of Anatolia to these areas.

Furthermore, in the 1990s, the conflict and huge damage in Kurdistan’s rural regions fueled internal migration, resulting in the development of substantial Kurdish populations in Istanbul, Ankara, Izmir, Adana, Mersin, and other cities. Turkey has become a transit point for Afghan and Iraqi immigrants, as well as some Africans, on route to Europe. The number of these immigrants is estimated to be in the hundreds of thousands, and many of them work in the informal sector while waiting to travel to Europe.[10]

These immigrants account for roughly one million individuals or two percent of the Turkish workforce. Around 80,000 Armenian immigrants without legal status are believed to live in Turkey.

Poverty in Turkey

Turkey’s poverty rate fell from 27.3 percent to 9.9 percent between 2004 and 2016, as assessed by the upper-middle-income country poverty level of $5.50 per person per day (2011 purchasing power parity). Despite the severe economic crisis of 2008-2009, income and employment growth were significant contributors to lowering poverty during that time. Unemployment, on the other hand, has increased since 2018. In January 2019, overall inflation increased to 20.3 percent, while food price inflation increased to 30.9 percent. Food price inflation affects the poor disproportionately since they spend a higher part of their income on food.[11,12]

In January 2019, the government responded by raising the minimum wage by 26% and announcing job support initiatives to help low-income families. The World Bank forecasts a 1% economic growth rate in 2019, with a small rebound in 2020-2021, notwithstanding the significant uncertainty. It also predicted that poverty rates will climb to 9% between 2018 and 2020, with an increase in the number of impoverished people.[3]

Inequality has risen in the previous ten years. Despite falling from 42.2 in 2003 to 39.0 before the 2008 financial crisis, the Gini index rose to 41.9 in 2016. The impact of the economic crisis on labor market returns contributed to the rise in inequality. The lowest level of average per capita consumption growth was 40%, which is still lower than the greater percentage recorded between 2011 and 2016. Over the same time period, the general prosperity index was negative, at -0.94 percent.[3]

Turkish Economic Growth to Exceed Expectations in 2021

Investment demand in Turkey continues to increase despite the pandemic, says the industry minister.

According to Turkey’s industry minister, 2021 is the year when the globe will triumph in the fight against the epidemic, and the country’s economy would see unparalleled development. Mustafa Varank, speaking at the inauguration ceremony of an aluminum plant in Turkey’s industrial region of Kocaeli, stated that world output and commerce will see one of the biggest declines in the past century in 2020. He noted that the world economy and commerce both shrank by 3.3 percent and 8.5 percent, respectively. In response to a question on Turkey’s performance in 2020, he stated that despite the turmoil, the country’s GDP grew by 1.8 percent.[13]

The need for investment did not decrease during the epidemic, but rather rose, according to the ministry. According to Varank, Turkey’s industrial production approached pre-pandemic levels in June. He went on to say that the country’s exports in the second half of 2020 were on par with the same time in 2019. During the epidemic, he claimed, the industrial sector created 392,000 new jobs. In the first quarter of 2021, industrial production increased by 12.3%, he added.[13]

  1. Turkey – The World Factbook. THE WORLD FACTBOOK. Retrieved July 27, 2021, from: <>
  2. Turkey – Credit Rating. TRADING ECONOMICS. Retrieved July 27, 2021, from: <>
  3. Overview. World Bank. Retrieved July 27, 2021, from: <>
  4. Weforum. (2017-2018). Insight Report. The Global Competitiveness Report 2017–2018 <–2018.pdf>
  5. Republic of Turkey Prime Ministry Investment Support & Promotion Agency. (2017). Financial Services Sector in Turkey. <>
  6. OECD Territorial Reviews, ISTANBUL, TURKEY. <>
  7. Labor force, female (% of the total labor force) – Turkey | Data. (n.d.). THE WORLD BANK. Retrieved July 27, 2021, from: <>
  8. Republic of Turkey – Ministry of Foreign Affairs. Turkish Citizens Living Abroad. <>
  9. Pacaci Elitok, Secil (Ed.); Straubhaar, Thomas (Ed.) (2012): Turkey, migration and the EU: Potentials, challenges and opportunities, Edition HWWI, No. 5, ISBN978-3-937816-94-4, Hamburg University Press, Hamburg, <>
  10. Canada: Immigration and Refugee Board of Canada, Turkey: Situation of Kurds in western cities such as Ankara, Istanbul, Izmir, Konya, and Mersin; resettlement to these cities (2009 – May 2012), 14 June 2012, available at: <> [accessed 27 July 2021]
  11. TCMB – Consumer Prices. (n.d.). The Republic of Turkey – National Bank. Retrieved July 27, 2021, from: <>
  12. Poverty & Equity Brief. Turkey. Europe & Central Asia. (April 2020). <>
  13. Anadolu Agency. (2021, May 25). Turkish economic growth to exceed expectations in 2021. <>
  1. (2021, July 27). The economy of Turkey – Chronicle. <>
  2. Anadolu Agency. (2021, May 25). Turkish economic growth to exceed expectations in 2021. <>

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