By Matija Šerić
National economies largely reflect how strong or weak a country is. The economy serves as a kind of backbone for the state, facilitating or complicating daily life. Countries with strong economies in certain areas (exports, technology hubs, transit routes) secure their place at the table in key international organizations. One country that can take pride in its economy is the Republic of Turkey.
Turkey – A Powerful Global Economic Force
The modern state founded by Mustafa Kemal Atatürk is a member of several respected international economic organizations, including the Organization for Economic Cooperation and Development (OECD), the Group of 20 largest economies (G20), and the Organization of the Black Sea Economic Cooperation (BSEC). Moreover, Ankara was among the founding members of these organizations. As early as 1995, Turkey and the European Union signed a free trade agreement, allowing mutual trade without tariffs, which has been a major advantage for Turkey.
According to data from the International Monetary Fund (IMF) and the World Bank, in 2025 the Turkish economy ranked as the 16th largest in the world and the 7th largest in Europe, with a nominal GDP of USD 1.5 trillion. Last year, GDP growth was 3.5%. Measured by purchasing power parity (PPP), Turkey’s GDP in 2025 was the 11th largest globally and 5th in Europe, totaling USD 3.7 trillion.
Turkish growth is impressive
Promising Trends and Strong Exports
The structure of the national GDP reveals a lot about the economy. Services account for 57%, industry 26%, agriculture around 5.5%, and about 10% come from other sectors. Tourism alone is estimated to contribute around 10% of GDP, unsurprisingly, as Turkey is the 4th most visited country in the world.
Last year, Turkey exported goods and services worth USD 273 billion while importing USD 365 billion. Its main export destinations are Germany, the United Kingdom, the United States, and Italy, while major import sources include China, Russia, Germany, and the U.S. This indicates that Turkey could further improve its export performance, although it is not weak at present.
A Middle-Income Country
The figures that better reflect the living standards of Turks come from GDP per capita, as the country has over 86 million inhabitants. A larger population increases the challenge of providing employment and an adequate standard of living for everyone. By nominal GDP per capita, Turkey is relatively weak at USD 13,473 in 2025, ranking 66th in the world. By PPP per capita, Turkey ranked 51st globally with USD 43,786, highlighting that further improvements in citizens’ living standards are still needed.
Significant Rise and Risky Decline
In the 21st century, Turkey has experienced major changes in financial and social aspects, including rising employment and average income. The period of robust economic growth from 2002 to 2013 (except for 2009, impacted by the Global Financial Crisis) was driven by manufacturing, construction, financial services, tourism, and trade.
This prosperous decade was followed by stagnation and recession from 2014 to 2020, especially when measured in nominal USD. The 2018 Turkish currency and debt crisis was a key challenge. Development-oriented and populist financial policies, including efforts to keep interest rates as low as possible (sometimes called “Erdoganomics”), led to one of the highest inflation rates globally from 2018 onwards.
Partial Recovery Brings Stability
Despite these challenges, GDP measured by PPP and nominal GDP in Turkish lira continued to grow. Turkey gradually transformed from a lower-middle-income to an upper-middle-income country. Since 2021, a stable recovery has been observed, with accelerated growth in nominal GDP in USD and GDP by PPP, reaching historical highs in recent years.
Following the 2023 parliamentary and presidential elections, and the appointment of Mehmet Şimşek as Minister of Finance and Treasury, Turkey adopted a more orthodox approach to monetary policy, particularly regarding interest rates. This shift allowed inflation, which had peaked at 86% at the end of 2022, to fall to around 31% by the end of last year.
Hyundai plant in Turkey
High-Tech Economy
Turkey’s economy is modern, newly industrialized, and technology-oriented—a fact often underestimated. Beginning in the early 2000s, Turkish universities initiated numerous technology parks that now serve as dynamic innovation centers with over 1,600 R&D facilities, attracting domestic and international investment.
Turkey is among the world’s leading producers of motor vehicles, consumer electronics, household appliances, and defense products. Prominent automotive brands include TOGG, BMC, Ford Otosan, Karsan, and Temsa. In electronics and appliances, key players are Arçelik (brands Beko and Grundig), Vestel, and Profilo. In defense, Aselsan, Roketsan, Havelsan, and FNSS produce military systems, armored vehicles, and missile technologies.
Turkey – A Key Destination for Foreign Investment
International car manufacturers such as Hyundai, Toyota, and Renault operate factories in Turkey. In addition, global brands like Unilever, Nestlé, Procter & Gamble, and Pepsi produce food, beverages, and household products for domestic and export markets. Arçelik, in partnership with Whirlpool and other international companies, manufactures household appliances exported to Europe and the Middle East. In 2021, Turkey ranked 8th globally in technological development according to the Economic Complexity Index.
Inflation Remains a Major Challenge
The Central Bank of the Republic of Turkey (CBRT) cut its key interest rate by 100 basis points to 37% on January 22, lower than market expectations, citing persistent inflation, price formation distortions, and inflation expectations that slow deflation. CBRT stated that monetary policy would remain restrictive until inflation is permanently under control. Inflation remains a significant problem.
Consumer prices rose 30.9% year-on-year in December, with a monthly increase of 0.89%, lower than expected, partly due to reduced food prices. However, due to several New Year price adjustments and a 27% increase in the minimum wage for 2026, inflation is expected to be more volatile from January onward.
Pollution Hinders Economic Growth
A major issue for the Turkish economy is the lack of legally enforced limits on air pollution, which, according to the Clean Air Platform, cost Turkey 10% of GDP in 2024. Poor air quality affects citizens’ health, increasing healthcare costs. Reducing pollution could boost productivity and long-term economic growth. Despite these challenges, life expectancy in 2026 is expected to reach 78.5 years, indicating that living conditions in Turkey are still relatively good.
Inflation is a big challenge
Prospects and Challenges for Turkey’s Economic Development
For Turkey to continue progressing, it will need to improve macroeconomic conditions and increase productivity, which has been declining since the mid-2010s. Poverty reduction (currently 13–14%) and extreme poverty (3–4%) are also priorities. The government must address the damage caused by the 2023 earthquakes, which claimed around 50,000 lives, injured over 100,000 people, destroyed 1.9 million homes, and displaced 3.3 million people. The estimated cost of reconstruction is USD 81 billion.
Significant progress has already been made: around 70% of planned housing reconstruction is complete, with tens of thousands of new homes built and handed over to displaced residents. However, many people remain displaced. Another challenge is that roughly 70% of Turkey’s territory is in seismically active areas.
Turkey also needs to further improve foreign direct investment, which amounted to USD 13.1 billion last year. Overall, there are numerous challenges Turkish economic experts must navigate to sustain growth and development. The country’s potential is nearly limitless.
