Economy of Turkey

Turkey's economy stands as a dynamic force with a diverse economic structure, blending agriculture, industry, and services. Positioned at the crossroads of Europe and Asia, Turkey has witnessed remarkable growth and resilience, making it a key player in the global economic landscape.

Turkey has been categorized as an emerging and developing economy by the International Monetary Fund (IMF). Additionally, it holds the status of one of the founding members of the Organization for Economic Co-operation and Development (OECD) and has been a member of the G-20 since its establishment.

In 2023, Turkey experienced a rise in its nominal GDP by $1.15 trillion and reached $3.61 trillion in terms of purchasing power parity (PPP). The country held the 17th position in nominal GDP and the 11th position in PPP GDP rankings. The GDP growth rate was 5.5% in 2022 and decreased to 4.0% in 2023. The nominal GDP per capita increased to $13,380, ranking 65th, while the PPP GDP per capita reached $41,890, placing Turkey 47th in the global rankings for the respective categories.

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In 2023, tourism significantly contributed to Turkey's economy with a total contribution of 1,732 billion Turkish lira, showcasing a notable increase compared to the previous years—1,698.7 billion in 2022 and 525.5 billion in 2021. This reflects a substantial growth from the challenging economic conditions in 2020 when the contribution was 249.1 billion Turkish lira.

Turkey is a significant player in the world economy, serving as a major exporter of textiles, clothing, automotive goods, and other products. The country is also notable for its steel production, chemical industry, and tourism.

The ongoing economic crisis in Turkey is marked by a sharp devaluation of the Turkish lira (TRY), soaring inflation, escalating borrowing costs, and a corresponding increase in loan defaults. The crisis stems from Turkey's excessive current account deficit, substantial private foreign-currency denominated debt, and President Recep Tayyip Erdoğan's growing authoritarianism, coupled with unconventional ideas about interest rate policy. Geopolitical tensions with the United States, intensified after the detention of American pastor Andrew Brunson, further exacerbated the situation, leading to increased tariffs on Turkish steel and aluminum by the Trump administration. This move priced Turkish steel out of the US market, which constituted 13% of Turkey's total steel exports. The replacement of Central Bank chief Naci Ağbal with Şahap Kavcıoğlu and a subsequent interest rate cut from 19% to 14% contributed to a 44% depreciation of the lira in 2021, following a brief period of recovery during the COVID-19 pandemic.

Erdogan asserts that implementing a stringent monetary policy will lead to a reduction in inflation. The anticipated annual inflation rate for 2024 is projected to be 33%, while economic growth is expected to reach 4%. The current program marks a significant shift in policy direction.

Turkey utilizes the Turkish lira (1 TRY = 100 Kurus), experiencing a 10.0% unemployment rate, a substantial 72.31% inflation rate, and a 42.30% commercial tax rate. The average income is $10,640, with a central government debt of 26.88% of GDP and a general government debt of 31.18%. The corruption index is 64, indicating a situation categorized as "bad."

In contrast, Venezuela employs the bolivar digital (1 VED = 100 Céntimos), showcasing a lower 5.3% unemployment rate but grappling with an extraordinarily high 2,959.80% inflation rate and a steep 73.30% commercial tax rate. The average income is higher at $13,080, accompanied by a central government debt of 68.51% of GDP and a considerably higher general government debt of 157.81%. Venezuela faces a challenging corruption index of 86, signifying a situation categorized as "very bad."

Argentina and Turkey exhibit distinct economic indicators. Argentina utilizes the Argentine peso (1 ARS = 100 Centavos) and faces a 6.5% unemployment rate, high 94.80% inflation rate, and a substantial 106.30% commercial tax rate. The average income is $11,590, with a central government debt of 84.47% of GDP and a corruption index of 62 (bad).

Turkey, on the other hand, employs the Turkish lira (1 TRY = 100 Kurus) and has a higher 10.0% unemployment rate, a 72.31% inflation rate, and a lower 42.30% commercial tax rate. The average income is $10,640, with a central government debt of 26.88% of GDP and a slightly better corruption index of 64 (bad).

In Mexico, the economic landscape is marked by the use of the Mexican peso (1 MXN = 100 Centavos), showcasing a 3.3% unemployment rate, 7.90% inflation rate, and a 55.10% commercial tax rate. The cost of living is at 58.51% of the U.S. level, with an average income of $10,820 and a central government debt of 40.86% of GDP. The corruption index is 69, indicating a challenging situation.

In contrast, Turkey operates with the Turkish lira (1 TRY = 100 Kurus), featuring a higher 10.0% unemployment rate, a significant 72.31% inflation rate, and a 42.30% commercial tax rate. The cost of living is lower at 30.38% of the U.S. level, with an average income of $10,640 and a central government debt of 26.88% of GDP. The corruption index is 64, reflecting a similar challenging scenario.

Iran operates with the Iranian rial (1 IRR = 100 Dinars), featuring an 11.0% unemployment rate, a notable 43.49% inflation rate, and a high cost of living at 122.88% of the U.S. level. Commercial taxes and contributions are at 44.70%, with an average income of $3,980 and a central government debt of 34.01% of GDP. The corruption index is 75, signaling a situation categorized as "very bad."

In comparison, Turkey uses the Turkish lira (1 TRY = 100 Kurus), with a 10.0% unemployment rate, a higher 72.31% inflation rate, and a lower cost of living at 30.38% of the U.S. level. Commercial taxes and contributions are at 42.30%, with an average income of $10,640 and a central government debt of 26.88% of GDP. The corruption index is 64, reflecting a scenario categorized as "bad."

Leveraging digital technologies is crucial for fostering economic growth, especially during economic crises such as the COVID-19 pandemic, emphasizing the need for connectivity. The World Bank's "Digital Development" team collaborates globally with national governments, including Turkey, to establish preconditions for a digital economy. Ensuring affordable access to high-speed internet and implementing secure digital solutions is pivotal.

In consultations with the Turkish government, the World Bank team highlighted IDS (International Data Spaces) as a best practice. Consequently, IDSA experts, in collaboration with European Commission representatives, BDVA, and the Gaia-X initiative, presented the concept of international data spaces to Turkish decision-makers through workshops. Participants included representatives from the Ministry of Science, Industry, and Technology, the Scientific and Technological Research Council of Turkey, and researchers from various universities.

The Turkish manufacturing industry, constituting 19% of the country's GDP in 2018 (with a goal to increase to 21% by 2023), is undergoing data-driven transformation. Recognizing the need for an industrial cloud platform, the Turkish government aims to establish a collaborative space for companies and organizations to collectively manage and utilize growing data volumes.

The adoption of the IDS standard in Turkey facilitates the development of innovative, user-friendly, and sustainable data-driven business models. The government intends to prioritize data sovereignty, extending the IDS standard to the industry through use cases and research projects.

Li from Istanbul says: "Turkey has consistently faced a significant trade deficit, exacerbated by factors such as high public expenditures, challenges in tax collection, and reliance on consumption-based taxes. Foreign investments previously helped mitigate currency crises and boost employment, but obstacles like political tensions, Syrian civil war disruptions, and refugee-related expenditures have fueled the trade imbalance. Geographically, Turkey's landscape, seismic activity, and proximity to conflict zones contribute to its challenges, debunking the notion of a geographical advantage. The nation grapples with diverse issues, including terrorism, earthquakes, and regional instability, impacting its economic dynamics."