TURKISH ECONOMY, 20.3.2019
TURKISH ECONOMY, 1/28/2019
Turkey’s economy has performed remarkably well with its steady growth over the past 15 years. A sound macroeconomic strategy,prudent fiscal policies, and major structural reformshave all contributed to the integration of Turkey’s economy into the globalized world while also transforming the country into one of the major recipients of FDI in its region.
These reforms have increased the role of the private sector inTurkey’s economy, enhanced the efficiency and resiliency of the financial sector, and placed public finance on a more solid foundation. These reforms strengthened the macroeconomic fundamentals of the country, allowing the economy to grow at an annual average real GDP growth rate of 5.6 percent from 2003 to 2017. The economic power of Turkey has drastically increased and Turkey became the 13thlargest economy in the world, and the 5thlargest compared to the 28 EU countries in terms of GDP at purchasing power parity in 2017.
The country’s strong economic performance over the past decade has encouraged investors to make confident projections about the future of the Turkish economy. For example, according to the OECD, Turkey is expected to be one of the fastest growing economies among OECD members during 2015-2025, with an annual average growth rate of 4.9 percent.
Over the past decade, the GDP has more than tripled in current US dollar terms, reaching USD 851 billion in 2017. Such an impressive economic growth made Turkey an industrial powerhouse in its region. Turkey is the largest light commercial vehicle producer in Europe and the 14thlargest automotive manufacturer in the world. Similarly, Turkey is the 2ndlargest steel manufacturer as compared with the 28 EU and 8thlargest in the world. Today Turkey offers highly lucrative investment opportunities in a variety of sectors, such as automotive, machinery, mining, energy, renewable energy, defense and aerospace, real estate, finance, ICT, agriculture, chemicals, petrochemicals, iron and steel, and so on.
Turkey has been implementing an active policy to improve its investment environment. To start with, the FDI frame law, which was passed by the Parliament in 2003, is the first installment of these significant economic reforms to change the investment environment in Turkey and make it attractive to global investors. This law guaranteed equal treatment to all investors without differentiating between local and international investors and enabled all international investors to enter Turkey without a preliminary authorization request, to transfer dividends freely, to access real estate, to be protected against expropriation, and to hire expatriates, etc. Turkey also decreased corporate tax from 33 percent to 20 percent for all companies. Important parameters, such as the acceptance of the international arbitration courts and the ongoing harmonization of laws with EU legislation have made Turkey one of the most liberal countries in the world, both in terms of the legal framework for FDI and the investment environment.
The sum of all the joint efforts has led Turkey to a very impressive economic output. Put differently, in a very short period of time, the FDI received by Turkey has benefited from these deep structural reforms. While Turkey attracted approximately USD 1 billion of FDI per year on average between 1992 and 2002, it has been attracting an average annual FDI of more than USD 12.8 billion since 2003.
In the light of developments, it is certain that the Turkey of today is very different from the Turkey of 10 years ago. Similarly, the Turkey of 2023, a Turkey celebrating the centennial foundation of the republic, will also be strikingly different from today. With ambitious targets set by the current government, the Turkey of 2023 is expected to be a more prosperous and added-value generating member of the international community with a vital contributing role to global peace and welfare. Active on a global scale, Turkey is also offering investors a platform to benefit from emerging opportunities in other countries, particularly in the surrounding region. Turkey’s strategic location allows investors to access a potential market of 1.6 billion people, a combined GDP of USD 25 trillion and foreign trade of USD 8 trillion.
Turkey, with an improved and investor-friendly business environment, achieved considerable success in both domestic and foreign investments over the decade, not only raised the bar a notch, but is now also on track to realize its real and deserved potential; to be home to investments that will contribute to new jobs, new technologies and new visions.
Together with stable economic growth, Turkey has also reined in its public finances; the EU-defined general government nominal debt stock fell to 28 percent in 2017 from 72 percent in 2002. Turkey has been meeting the “EU’s 60 percent Maastricht criteria” for public debt stock since 2004. Similarly, during 2003-2017, the budget deficit decreased from more than 10 percent to less than 2 percent as a ratio to GDP, which is one of the EU Maastricht criteria for the budget balance.
As the GDP levels increased to USD 851 billion in 2017, up from USD 236 billion in 2002, GDP per capita soared to USD 10,597, up from USD 3,581 in the given period.
The visible improvements in Turkey’s economy have also boosted foreign trade. Exports reached USD 157 billion by the end of 2017, up from USD 36 billion in 2002, while tourism revenues, which were around USD 12.4 billion in 2002, exceeded USD 26 billion in 2017.
Significant improvements in such a short period of time have registered Turkey on the world economic scale as an exceptional emerging economy. It is the 17thlargest economy in the world and the 6thlargest economy when compared with the EU countries, according to GDP figures in 2017.
Institutionalized economy fueled by USD 180 billion of FDI in the past 15 years
17thlargest economy in the world and 6thlargest economy compared with EU countries in 2017 (GDP, IMF)
Robust economic growth with an annual average real GDP growth of 5.6 percent during 2003-2017
GDP reached USD 851 billion in 2017, up from USD 236 billion in 2002
Sound economic policies with prudent fiscal discipline
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