Turkey's economy – figures, sectors & trade

Economy

The Turkish economy slid into recession at the end of 2018.

Turkey has had a foreign trade deficit for many years. Oil, intermediate products and grain have to be imported.

Before the collapse of the lira, with a loss in value of two thirds since 2011 accompanied by inflation of 20 percent (as of March 2019), the Turkish economy achieved high growth rates from 2003 to 2013. Gross domestic product (GDP) rose at that time from 303 to 857 billion US dollars.

Monetary easing in the USA since around 2009 and the ECB's low-interest-rate policy caused billions of US dollars and euros to flow into emerging markets and generated strong economic growth at the time. The Turkish economy grew by around 9 percent in both 2010 and 2011; in 2012 it grew by 2.2 percent.

In the Global Competitiveness Index, which measures a country's competitiveness, Turkey today ranks 53rd out of 137 countries (as of 2017–18).[118] In the Index of Economic Freedom, Turkey ranked 70th out of 180 countries in 2017.[119] The rating agencies Moody's and Finch lowered their rating for Turkey's creditworthiness again in 2018 after 2016: long-term liabilities are now only rated “Ba2” (in the junk bond range).

Turkey's economic situation is very contradictory. There is a large gap between the industrialised West with its modern industry (especially in the big cities) on the one hand and the agrarian, little-developed East on the other. The unemployment rate in 2017 was 11.2 %. In 2017, 18.4 % of the entire workforce worked in agriculture, 26.6 % in industry and 54.9 % in the service sector. The total number of employed persons for 2017 is estimated at 31.3 million. Challenges for the labour market remain the high proportion of undeclared work and the low employment rate of women (approx. 30 %).

The official minimum wage in 2016 amounts to 1,647 Turkish lira gross (around 520 euros) per month.

Greater Istanbul, for example, reaches 41 % of the average income of the 15 old EU states, whereas the East reaches only 7 %. Various projects, including the large dam projects (Southeastern Anatolia Project (GAP)), are intended to help the East develop. In addition, there are considerable structural problems in the Turkish economy. Agriculture, for example, contributes only 11.9 % to GNP but employs 30.6 % of the workforce. Industry contributes 29.6 % to GNP and the service sector 58.5 %. 19.3 % of all employed persons work in industry and 44.5 % in services. Since 1996 there has been a customs union between Turkey and the EU (51.6 % of exports go to the EU, 46 % of imports come from the EU).

On 1 January 2005 the old Turkish lira (formerly also called the Turkish pound) was replaced by the New Turkish Lira (Yeni Türk Lirası). The Turkish lira thus lost 6 zeros. The subunit of the lira, the kuruş, was also reintroduced.

Turkey's economy is characterised by high growth combined with even higher inflation.

Around 1994 and 1995 this reached almost hyperinflationary levels of 150 %, in 2011 it fell to 6.5 %, and in 2015 it was 7.5 %.[133] In 2018 the exchange rate of the Turkish lira fell by around 40 % compared to the previous year.

The most important economic sectors are the textile industry, tourism, the automotive industry, as well as the chemical industry, mechanical engineering and the electronics sector. Direct investment by foreign companies in Turkey was approx. 4.6 billion euros in 2002, of which 3.3 billion came from Germany. From 22 billion US dollars in 2007 it fell to 8.5 billion as a result of the financial crisis in 2009 and has since fluctuated between 12 and 13 billion US dollars per year.

Under the impression of the erosion of institutions since the coup in 2016, rating agencies downgraded the country several times: Moody's downgraded the national currency to junk status and criticises the lack of independence of the central bank and the courts from political influence. For ten-year bonds Turkey had to pay 12 to 13 percent per year, in line with the high risk for its investors. The sharply negative current account deficit continued to grow.

The euro exchange rate of the Turkish lira fell by around 40 % from 2016 to the present 2018