The last ten years have seen many changes in the economy of Turkey. Throughout the first 6 decades of the Republic of Turkey, the government of Turkey focused their economy internally. They limited foreign trade, private sector participation, and direct investments from foreign entities. A series of reforms were set in place, beginning in 1983. These reforms led to an unheard of level of growth. This lasted until the 1994 when they had their first financial crisis. Another major financial stumble occurred in 2001. In the time since their last major financial speedbump, Turkey has worked to increase their GDP and improve their economy. Here is an overview of the economy of Turkey.
An Overview of the Economy of Turkey
In January of 2005, the government of Turkey issued a new currency, the Turkish new lira. This was done as a response to the recent stabilising of the economy. After further growth, the currency was renamed the Turkish lira in 2009. When the currency was renamed in 2009, the inflation rate in Turkey had dropped to 6.53%.
This was much better than in 1994 when the inflation rate was a staggering 120.31%. As of this writing, the Turkish lira has an exchange rate 0.400 with the European Union’s euro. That means that one euro would exchange for 2.5 Turkish liras. As the economy of Turkey continues to grow and the European Union continues to stumble, the exchange rate stay very favourable.
Gross Domestic Product of Turkey
The economy of Turkey is supported by their GDP and international trade. The trade deficit of Turkey has fluctuated over the years. Before 1994, they exported more than they imported. In May of 2013, the trade deficit of Turkey was listed at 9.8 billion USD. This means that they imported 9.8 billion dollars’ worth of goods more than they exported. Over the last ten years they began needing to import more goods, mostly due to the demands of energy and machinery and the everyday needs of a progressive citizenry with disposable dollars and western taste in everything.
The majority of their imports are machinery, fuels, chemicals, and semi-finished goods. The major exports of Turkey are clothing, iron and steel, pharmaceuticals, automotive goods, electronics and ships. In 2012, the GDP of Turkey was listed at 773.091 billion USD.
Turkey and International Trade
Turkey is well positioned to be able to handle a large volume of imports and exports, since it is situated between several major seas. The main trading partners of Turkey are the European Union, Russia, and the United States. Trade with the European Union makes up 57% of Turkey’s exports and 40% of their imports. In 2012, Turkey recorded highest level of exports ever with USD 152 billion exported globally. There has been a steady increase in the amount of goods that Turkey imports, reaching 23208.79 million USD in May of 2013.
The GDP of Turkey is mostly balanced as compared to other democracies, divided between their agricultural sector, industrial sector, and the services sector. The industrial sector accounts for 26% of Turkey’s GDP, 65% of the services sector, and 9% from the agricultural sector. With only 9% of the GDP, agriculture represents 24.7% of employment in Turkey.
Foreign investment is a major part of any growing economy. It helps finance growth and shows that the economy is stable enough to attract foreign investors. The reforms that began in 1983 have paved the way for foreign investments; however, it wasn’t until the past several years that foreign investors began showing an interest in the industries of Turkey as most global economies faltered and Turkey thrived. 8.3 billion dollars were invested in Turkish industries by foreign investors, in 2012. It is expected that this number will rise to $15 billion by the end of 2013.
Turkey’s Manufacturing Industry
The manufacturing industry of Turkey makes up a large portion of their GDP. Industrial production in Turkey has averaged 4.59% of their economy over the last thirty years. This does not mean that their industrial production is always low. In December of 2009, manufacturing made up 25.20% of the economy of Turkey. This shows that the industrial sector of Turkey’s economy has begun to account for more demand in foreign and domestic manufacturing.
One of the biggest industries in Turkey is their shipbuilding industry. In 2011, the shipbuilding industry in Turkey exported over $1.2 billion USD worth of goods. There are currently 70 shipyards in Turkey and another 56 in development.
The Technology and Energy sectors of Turkey
Turkey is a modern country with modern technology and energy sources. However, these sectors make up a very small amount of Turkey’s economy. In fact, a large portion of their imports is related to technology and energy. This is due to the increased growth in production. Currently, Turkey is planning on building three nuclear power stations to support their increased demand for energy. Over time, if Turkey can manage to rely less on foreign energy, they may once again see a positive trade account with the rest of the world.
Tourism in Turkey
Tourism is an important part of Turkey’s economy. During 2011, over 33 million foreign travellers visited Turkey – resulting in over $23 billion USD income for the economy of Turkey. This makes Turkey the sixth most visited tourism destination in the entire world.
The combination of tourism and domestic growth is also driving Turkey to add a new airport. Upon its completion, the new airport is expected to be the largest in the world, reinforcing Turkey’s status as a regional and global gateway.
The Future of Turkey’s Economy
If the past ten years are any indication of where the economy of Turkey is headed, then the future of Turkey looks extremely bright. The majority of developed nations were affected by the financial crisis of 2009 and Turkey has been able to bounce back easily because it avoided the greedy overinvestment of most democracies. If Turkey is able to join the European Union, there could be even more growth, which can help the rest of Europe as well. Turkey has been, and will continue to be, a major player in international trade.
Turkey currently has the 15th largest economy in the world. Since 2003, the GDP of Turkey has more than doubled, having a GDP of 304 billion USD in 2003 and 773 billion in 2012. Other aspects of their economy have recovered as well, with unemployment dropping to less than 10%. All of these signs show that the economy of Turkey is not only mended, but robustly healthy. They are major power in the world and their exports continue to grow. With less dependence on importing energy sources, Turkey is perfectly suited to further climb the ranks of the worlds largest economies.
For further suggested reading on economy and investment climate in Turkey refer to Invest in Turkey by the Republic of Turkey Prime Ministry
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