Turkish Embassy in Ottawa

Info Notes

TURKISH ECONOMY, 17.01.2015

Turkey has undergone a profound economic transformation since 2001. It has recorded a remarkable GDP growth rate of almost % 5 in average during the period of 2002-2013. Thus, per capita income increased up to almost 11,000 USD in 2014. Today, Turkey is the 17th largest economy in the world with a GDP of about 820 billion dollars in 2013.

 

2023 Vision sets out ambitious but attainable goals that Turkey would like to achieve on the 100th anniversary of the Republic. Accordingly, Turkey aims at being among the top 10 economies in the world with 2 trillion USD GDP, 25.000 USD GDP per capita and 500 billion USD exports.

Turkish Economic Performance

 

Turkey is a rising economic powerhouse and a strong emerging power in the global economy, with a young, well educated, qualified and competitive work force, a strong domestic market, competitive and dynamic private sector, highly developed technological infrastructure in transportation, telecommunications and energy sectors; an energy terminal and corridor in its region connecting East and West, having a Customs Union with the EU since 1996 and being an accession country to the EU.

 

Turkey is strategically located at the epicentre of Eurasia. This has been an asset in forging cooperative economic partnerships with its neighbourhood. Its membership in G-20 is an indicator for its growing role as a responsible stakeholder in the global economic governance. On December 2014, Turkey assumed the Presidency of G20 for 2015.

 

The Turkish economy has achieved an outstanding performance with its steady growth since 2002.
Sound macroeconomic strategies, prudent fiscal and monetary policies, structural reforms that the Turkish government has been pursuing in the last decade resulted in high rates of growth and increased confidence in the Turkish economy.

As structural reforms have strengthened the macroeconomic fundamentals of the country, the economy grew with an average annual real GDP growth rate of 5 percent between 2002 and 2013.


Due to the global crisis, majority of the emerging markets suffered a significant slowdown in economic activity. Being an open and free-market economy, integrated with the global economic and financial system, Turkey was also affected by the declining external demand and falling international capital flows. However, Turkish economy bounced back and has achieved a growth rate of % 9.2 and % 8.5 in the years 2010 and 2011 respectively, thus standing out as the fastest growing economy in Europe, and one of the fastest growing economies in the world. Accordingly, while Turkish GDP stood at 231 billion USD in 2002, it rose to 820 billion USD at the end of 2013. Concurrently GDP per capita soared to 10,945 USD from USD 3,500 in 2002. As such, the Turkish economy is the 17th largest in the world and the 6th largest in Europe.

 

According to the OECD, Turkey is expected to be the fastest growing economy among the OECD members during 2012-2017 and 2018-2030 with % 5,1 and % 4,3 respectively. Turkey keeps the unemployment rate below % 10.

 

Fiscal Discipline

 

Implementation of strict regulatory and supervisory regulations on banks and financial institutions provided a buffer against external shocks.

Turkey has been extremely careful with its budget for the last decade.

 

General government budget deficit/GDP ratio was % 2.6 in 2011 and Turkey met the Maastricht criteria of % 3 while outperforming 18 EU Countries. External debt stock to GDP ratio was % 45 in 2013, which was below the level in 21 EU Countries and the Maastricht Criterion of % 60.

 

Monetary policies of the Turkish Central Bank played a crucial role in securing macroeconomic balances, and most importantly reining in inflation over the last decade. Despite high growth rates Turkey was able to keep the inflation rate at % 6.16 last year and it is expected to settle down around % 5 by the end of 2014.

Through prudent fiscal and monetary policies the current account deficit was reduced to % 7 of GDP in 2013.

 

Foreign Direct Investment

 

Structural reforms in Turkey have also improved the investment climate which in turn attracted Foreign Direct Investment (FDI). FDI legislation is based on the principle of equal treatment for domestic and foreign investors. Turkey grants all rights, incentives, exemptions, and privileges available to national businesses to foreign businesses on a most-favored-nation (MFN) basis. Turkish law accepts binding international arbitration of investment disputes between foreign investors and the state. Foreign capital entities can employ foreign personnel in Turkey. % 100 foreign ownership is permitted (except in Radio & TV Broadcasting). Foreign investors are free to repatriate their capital and profits. Private persons of foreign nationality and foreign companies can buy property in Turkey.

 

Privatization has also been among the top priorities of the Government’s agenda. Turkey has been listed among the top OECD countries that receive the most out of privatization. Privatization revenues reached 8 billion Dollars in the period of 1986-2003 and 36.2 billion Dollars on 2003-2013, reaching 44 billion Dollars.

Procedures for the privatization of 9 billion USD worth of public assets are in progress.  
 

Generous tax privileges for free zones and technology development zones (TZDs) - There are 20 free zones and 37 TZDs in Turkey. Firms operating in free zones enjoy % 100 exemptions from customs duties, % 100 exemption from corporate income tax, % 100 exemptions from Value Added Tax and Special Consumption Tax. Companies are free to transfer profits from free zones to abroad or to Turkey without restrictions. The total volume of trade in free trade zones reached 23 billion USD in 2013.

Turkey’s a new incentive scheme prioritizes high-tech, high-value-added globally competitive sectors. The new investment incentive covers value added tax exemption, customs duty exemption, tax deduction, income tax withholding exemption, interest rate support, land allocation and VAT refund.

Turkey has become the commercial hub of the region. Foreign companies have been using Turkey to access the EU market as well as for business opportunities throughout the Balkans, Central Asia, the Caucasus and the Middle East.

 

Turkey attracted 112 billion USD worth of investment during the 2002-2013 period. Capital flows to Turkey reached to 15,7 billion USD in 2011, 12,4 billion USD in 2012, 12,7 billion USD in 2013. Total foreign direct investment in Turkey reached around 130 billion USD at the end of 2013. Currently more than 30.000 companies with international capital are registered in Turkey. The top 5 five countries which have invested most in Turkey during 2002-2013 period:
 
 

Holland    17.961 Billion USD

Austria     9.273 Billion USD 

USA        8.875 Billion USD

Belgium   7.381 Billion USD  

Germany 7.335 Billion USD    

 

The top 5 countries investing in Turkey in 2013:

 

Germany 1.845 Billion USD 

Holland   1.024 Billion USD

Russian Federation  868 Million USD

Azerbaijan  776 Million USD

Austria       659 Million USD

 

Foreign Trade

 

Turkey has been pursuing an export-led growth since 1980. By virtue of economic reforms, restrictions on imports have been lifted, safeguard practices were reduced, and foreign exchange transactions were liberalized. The volume of Turkish exports increased to 152,6 billion USD in 2013 from 36 billion USD in 2002. The total trade volume accounted for 403.1 billion USD in 2013.

 

Turkey has engaged its neighbours through cooperation projects and has also instituted “High Level Strategic Cooperation Council” mechanisms with 16 countries, initiated the “Turkish-Arab Economic Forum” in 2007, established “Economic Cooperation Committee” with the Gulf Cooperation Council in 2009 etc. Turkish Government has signed Free Trade Agreements with 18 countries and EFTA and negotiations are under way with 13 countries.

Similarly, with a view to expanding the legal basis for fruitful economic interaction with its trade and investment partners, Turkey has accelerated the process of concluding Agreements on Avoidance of Double Taxation and the Prevention of Fiscal Evasion with 79 countries as well as Reciprocal Promotion and Protection of Investments with 92 countries. In a bid to diversify the pattern of its foreign trade, Turkey has also launched opening policies towards markets such as Africa, Latin America and East Asia. The result has been impressive. Breakdown of Turkish exports by countries as percentage in 2013 is as follows: 

Germany  % 9.0

Iraq  % 7,9

Iran  % 2,8

UK % 5,8

U.A.E. % 3,3

Russian Federation  % 4,6

Italy  % 4,4

France  % 4,2

USA  % 3,7

Spain  % 2,9

Egypt   % 2,1

 

Turkish imports amounted to 251 billion USD in 2013. Breakdown of Turkish imports by countries as percentage in 2013 is as follows:

Russian Federation  % 10,0

Germany  % 9,6

People’s Republic of China  % 9,8

USA  %   5,0

Italy  %   5,1

Iran %   4,1

France %   3,2

Spain %   2,5

India %   2,5

South Korea %   2,4

 

Turkish Business Abroad

 

Turkish businessmen have been increasingly active in neighbouring countries as well as other regional countries. This is most visible in construction business. Turkish contractors have successfully completed 7000 projects in 100 countries across the globe by the end of 2012. Total turnover of the Turkish construction and engineering sector has reached 242 billion USD.

Turkey is among the world’s top 12 producers of building materials such as steel, cement, glass and ceramic tiles.
 

Turkish international contracting services reached its peak with 31,3 billion USD in 2013. In 2013, Turkish contractors have undertaken 374 projects in 45 countries.
At present 38 Turkish companies are included among the “Top 250 International Contractors List” with an annual turnover of 31,5 billion USD in 2013.

With this figure Turkey ranked second in the world after China.
 

The amount of Turkish foreign direct investments (FDI) abroad has also risen exponentially. As of 2013, more than 4000 Turkish companies have invested around 30 billion USD abroad. Geographical breakdown of the Turkish investments abroad is as follows:

 

NORTH AMERICA (USA, Canada, Mexico)Total value of investment: 135 Million USD

 

EUROPE(Germany, Albania, Austria, Belgium, Bosnia-Hercegovina, Bulgaria, Czech Republic, Denmark, Finland, France, Croatia, Holland, UK, Ireland, Spain, Sweden, Switzerland, Italy, Serbia, Montenegro, Kosovo, Greece, Slovenia, Slovakia, Poland, Portugal, Romania, Macedonia, Hungary) Total value of investment: 14 Billion USD

 

EURASIA(Azerbaijan, Belarus, Georgia, Kazakhstan, Kırgizstan, Moldova, Uzbekistan, Russian Federation, Tadjikistan, Turkmenistan, Ukraine) Total value of investment: 8.7 Billion USD

MIDDLE EAST(UAE, Qatar, Saudi Arabia, Oman, Palestine, Iraq, Iran, Israel, Jordan, Yemen) Total value of investment: 4 Billion USD

 

SAHEL (Angola, Ethiopia, Ghana, Republic of South Africa, South Sudan, Cameroon, Kenya, Madagascar, Mozambique, Nigeria, Senegal, Sudan, Zambia) Total value of investment: 1.3 Billion USD

 

ASIA-PACIFIC(Afghanistan, Australia, People’s Republic of China, Indonesia, Philippines, South Korea, India, Hong Kong, Malaysia, Mongolia, Pakistan, Singapore, Thailand, Vietnam) Total value of investment: 1.3 Billion USD

 

NORTH AFRICA(Morocco, Tunisia, Algeria, Libya, Egypt) Total value of investment: 900 Million USD

 

SOUTH AMERICA(Argentina, Brazil, Colombia, Chile, Venezuela) Total value of investment: 200 Million USD

 

Among the countries which have attracted Turkish investments, The Netherlands drew the largest share of Turkish foreign investments, thanks partly to its large Turkish population and liberal investment environment. Turkish investments in the Netherlands account for % 29 of total Turkish investments abroad.

Turkish companies made the highest capital transfer on the energy industry. Turkey invested around 4 billion USD on energy, 3 billion USD on banking, 3 billion USD on manufacturing, 2 billion USD on informatics and communication, 1,5 billion USD on financial services, 1.4 billion USD on trade.

 

Turkish Airlines (THY) is an example of successful partnership between the Turkish public and private sectors. It ranks first in the world in terms of destination country. It flies to 104 countries and ranks fourth in terms of destinations which reached to 264 at the end of 2014. It owns an important operating fleet with a total of 261 aircraft. As such it boasts to have one of the youngest fleet in the world with an average 6.6 years. THY fleet carried almost 60 million passengers in 2014. Turkish Airlines has been chosen “Best Airline in Europe” (for the third year), “Best Airline in Southern Europe” and awarded “Best Business Class Catering” in 2013 Skytrax World Airline Awards.

 

Growing energy market - Turkey has become one of the fastest growing energy markets in the world in parallel to its economic growth registered in the last 10 years and is rapidly gaining a competitive structure. Growing energy demand, market liberalization, country’s potential role as an energy terminal in its region are 3 factors playing an important role in shaping the investment opportunities in Turkey. Turkey functions as an important energy terminal in its region due to its strategic location between Asia and Europe. Turkey’s vision of 2023, the centennial foundation of the Republic, envisages grandiose targets for the energy sector such as installing 5 billion m3 of natural gas storage capacity, construction of 3 nuclear power plants, full utilization of hydropower, construction of geothermal and solar power plants, increasing the share of renewables to % 30. Agreements have already been reached with the Russian Federation and Japan to construct nuclear power plants at Mersin and Sinop respectively. 

 

Large scale infrastructure projects - Political stability and economic vitality of the private sector have paved the way for the realization of large scale infrastructural investment projects. Currently Turkey has been carrying out mega projects such as construction of a third airport in Istanbul, third suspension bridge across the Bosphorus, high speed train tracks and highways throughout the country. Marmaray stands out as a 6,5 Billion USD rail transport project which connects the Asian and European part of Istanbul through railway a part of which consists of immersed tube tunnel under the Bosphorus. The first phase was inaugurated on 29 October 2013 and the Project is expected to be completed by 2015.

Responsible stakeholder of the international community - Turkey actively participates in the implementation process of the Millennium Development Goals (MDG). Turkey has increased its development cooperation in the last decade and as a rising donor country, it contributes to the efforts for achieving sustainable development and economic and social progress in the least developed countries, hence creation of a prosperous world and a stable international order. The amount of official development assistance (ODA) provided by Turkey reached 2,5 billion USD in 2012. Unofficial figure of Turkish ODA in 2013 has reached 3 billion USD. Turkey ranked first among the OECD member countries which have expanded their ODA. Turkey’s recent performance in this field signifies its strong political will and active involvement with the development agenda.  

As an active participant in the international development cooperation process, Turkey hosted the 4th UN Conference on the Least Developed Countries on 9-11 May 2011. At the end of the conference, the Istanbul Action Programme was adopted by which the international community endorsed its cooperation and partnership commitment towards the least developed countries. Moreover, at the conference, Turkey announced an economic and technical cooperation package according to which it would allocate 200 million USD annually for the economic and technical cooperation programmes and projects in the least developed countries. Turkey will also host the Review Conference of the 4th UN Conference on the Least Developed Countries in 2015.

 

Tourismrevenues help reduce the current account deficit of Turkey. 39 million tourists visited Turkey in 2013 and tourism revenue reached 32 billion USD. As such, Turkey ranked the 6th most visited country in the world. Turkish tourism sector’s target is to be among the top 5 countries in the world in terms of attracting the highest number of tourists and receiving the highest amount of tourism revenue by 2023.