Turkey Economic Outlook
Rapid recent growth:
Turkey, a transcontinental nation bridging Asia and Europe, boasts an economy with a GDP worth over USD 900 billion and a population of over 85 million. GDP growth in the decade to 2023 was rapid at around 5% annually, and Turkey was one of the few large economies in the world to continue expanding in 2020 despite the COVID-19 pandemic.
A diversified economy:While services make up the largest share of the economy—with tourism services particularly key—Turkey also has a sizable manufacturing sector worth over 20% of GDP. Automobiles, textiles, refined oil and jewellery are important exports. Agriculture represents around 6% of GDP, with major products including grains, fruits and vegetables.
Trade relations:Turkey entered a customs union with the European Union in 1995, though the union does not cover agricultural products. Further economic integration with the EU has been paralyzed for years due to fears in Western capitals about migration and the rule of law, and is like to remain so in the coming years.
Unorthodox economic policies:In recent years, monetary policy has been extremely loose due to President Erdogan's preference for low interest rates. This has translated into a collapsing lira and some of the world's highest inflation rates, which have weighed on purchasing power and investor sentiment. That said, monetary policy has become more conventional since Erdogan's May 2023 election win, with interest rates more than quadrupling between May and December 2023.
Economic challenges:Apart from extremely high inflation and a lack of confidence in the local currency, Turkey also suffers from rule of law concerns. The country has become more authoritarian in recent years, with political power tightly concentrated with the President. Moreover, a large and persistent current account deficit, low international reserves and large foreign currency liabilities mean there is a risk of a balance of payments crisis.
Turkey's economic outlook:The country's rapid population growth, growing consumer market, strategic location between Europe and Asia, large tourism potential and a young and entrepreneurial population will support economic activity in the coming years, though concerns over institutions and the rule of law will cap momentum.
Turkey's Macroeconomic Analysis:
Nominal GDP of USD 905 billion in 2022.
Nominal GDP of USD 1,115 billion in 2023.
GDP per capita of USD 12,926 compared to the global average of USD 10,589.
GDP per capita of USD 10,607 compared to the global average of USD 10,589.
Average real GDP growth of 5.3% over the last decade.
Average real GDP growth of 5.3% over the last decade.
Sector Analysis
In 2021, services accounted for 63% of overall GDP, manufacturing 22%, other industrial activity 9%, and agriculture 6%. Looking at GDP by expenditure, private consumption accounted for 55% of GDP in 2021, government consumption 13%, fixed investment 32%, and net exports 0%.International trade
In 2021, manufactured products made up 77% of total merchandise exports, mineral fuels 4%, food 11%, ores and metals 5% and agricultural raw materials 1%, with other categories accounting for 2% of the total. In the same period, manufactured products made up 60% of total merchandise imports, mineral fuels 6%, food 6%, ores and metals 10% and agricultural raw materials 3%, with other goods accounting for 15% of the total. Total exports were worth USD 253 billion in 2022, while total imports were USD 343 billion.Main Economic Indicators
Economic growthTurkey's GDP growth over the last decade was marked by volatility, influenced by political instability, monetary and fiscal policy changes, and currency fluctuations. That said, Turkey was one of the few large economies to avoid contraction in 2020 during the pandemic, and has generally outperformed most Eastern European economies in recent years, aided by burgeoning tourism, rapid population growth and fiscal handouts. To read more about GDP growth in Turkey, go to our dedicated page.
Fiscal policy
Turkey's fiscal deficit was generally narrow over the last decade, though the pandemic strained public finances. Moreover, the deficit surged in 2023 due to fiscal largesse ahead of the May 2023 elections. Find out more on our dedicated page.
Unemployment
Turkey's unemployment rate over the last decade was generally in double digits amid strong growth in the size of the labor force. The COVID-19 pandemic further impacted job markets. While the rate has fallen post pandemic, unemployment remains a concern, particularly among youth and in the face of persistent inflation and currency depreciation. For more information on Turkey's unemployment click here.
Inflation
Turkey's inflation over the last decade was turbulent, characterized by double-digit figures in many years as a result of loose monetary and fiscal policies, and huge currency depreciation. In 2022 and 2023, Turkey faced one of the highest inflation rates globally, amid a weak currency and large fiscal handouts. Go to our Turkey inflation page for extra insight.
Monetary Policy
Turkey's central bank policy rates over the last decade were marked by volatility. Political influence on the central bank led to unorthodox monetary policies, including substantial rate cuts despite high inflation. In 2023, the central bank reverted to a more conventional stance, hiking rates from 9% to over 40% in a bid to dampen price pressures. See our Turkey monetary policy page for additional details.
Exchange Rate
Turkey's exchange rate depreciated hugely against the U.S. dollar over the last decade, as a result of extremely high price pressures, periods of unorthodox monetary policy, and growing investor concerns over democracy and the rule of law. For more info on the lira, click here.
Economic situation in Turkey
Following Q2’s marked slowdown, our Consensus is for the economy to have shrunk in Q3 on a seasonally adjusted quarter-on-quarter basis. The industrial sector remained in the doldrums, as factory output contracted for the second successive quarter. Similarly, services production fell further in Q3. On a more positive note, retail sales rebounded, as price pressures eased throughout the quarter. Heading into Q4, our panelists expect GDP to contract again, and October data is downbeat. The manufacturing PMI came in under Q3’s average, pointing to a steeper deterioration in operating conditions in the sector. Additionally, economic sentiment remained downbeat. In other news, S&P Global upgraded the country’s rating to ‘BB-’ from ‘B+’ in November, citing an increase in foreign reserves and the ongoing disinflationary process as key drivers.Turkey Economic Forecasts
Projections out to 2034.52 indicators covered including both annual and quarterly frequencies.
Consensus Forecasts based on a panel of 43 expert analysts.
Want to get insight on the economic outlook for Turkey in the coming years? FocusEconomics collects projections out to 2034 on 52 economic indicators for Turkey from a panel of 43 analysts at the leading national, regional and global forecast institutions. These projections are then validated by our in-house team of economists and data analysts, and averaged to provide one Consensus Forecast you can rely on for each indicator. This means you avoid the risk of relying on out of date, biased or outlier forecasts. Our Consensus Forecasts can be visualized in whichever way best suits your needs, including via interactive online dashboards , direct data delivery and executive-style reports which combine analysts' projections with timely written analysis from our in-house team of economists on the latest developments in the Turkey economy. To download a sample report on the Turkey's economy, click here. To get in touch with our team for more information, fill in the form at the bottom of this page.
Turkey Economic Indicators
Frequently Asked Question about Turkey's Economy
Is Turkey a powerful economy?
What kind of economy does Turkey have?
What is the biggest contributor to Turkish GDP?
Turkey has a large and relatively strong economy. It is classified as an upper-middle-income country by the World Bank and is a member of the G20 and the OECD. Turkey's economy is diversified, with strengths in manufacturing, agriculture, and tourism. However, it also faces challenges, including high inflation and external imbalances.
Turkey has a mixed economy with a blend of modern industry and commerce alongside traditional agriculture. It's characterized by a strong private sector, significant state involvement in key industries, and an emerging market status.
The service sector is the biggest contributor to Turkish GDP, encompassing areas like tourism, banking, and retail. This sector is followed by industry, including manufacturing and construction, with agriculture also playing a notable role, though smaller in comparison to services and industry.