| |
Economy of Turkey
Overview
Non-agricultural economic activity is
concentrated in four regions, centered respectively around the Sea of Marmara,
Edirne on the west coast, the Adana-Mersin-İskenderun triangle along the
Mediterranean Sea, and Ankara. In 2005 a large share of Turkey’s major
enterprises remained in state hands. These included all of the transportation,
utilities, and communications infrastructure, many basic industries, and about
30 percent of the banking sector. After failing to fulfill earlier privatization
plans, in 2004 Turkey announced plans to privatize a wide range of industries,
including tobacco and sugar processing, communications, and energy. No target
dates were set, however. The economy has been plagued by high inflation and high
fiscal deficits. Those conditions improved somewhat in 2004, when private
investment increased significantly and the inflation rate declined. Beginning in
1999, the International Monetary Fund (IMF) has exerted strong pressure to
reform the economic system. The IMF responded to Turkey’s serious economic
crisis of 2001 with stand-by assistance programs contingent on reduced state
spending and debt, banking reform, accelerated privatization, and reduced
inflation.
Gross Domestic Product (GDP)
of Turkey
In 2004 Turkey’s GDP of US$307.5 billion showed
a real increase of 8.8 percent over the previous year, when the total was US$239
billion. In the first half of 2005, the GDP grew at a rate of 4.5 percent. The
growth between 2002 and 2003 was 5.8 percent. Between 1999 and 2002, the average
annual GDP increase was 2.9 percent, but the economy recorded decreases in 1999
and 2001. In 2004 the per capita GDP was US$4,414. The sectoral contribution to
GDP was as follows: services 59.6 percent, industry and construction 29 percent,
and agriculture 11.4 percent. In the early 2000s, the share of agriculture has
decreased, the share of industry and construction has remained approximately
constant, and the share of services has increased. For detailed statistics and
comparisons click Comparisons.
Turkish Government Budget
In 2004 Turkey’s state revenues totaled US$86.4
billion, and its expenditures totaled US$108.1 billion, creating a deficit of
US$21.7 billion. In 2003 revenues were US$66.8 billion and expenditures were
US$93.3 billion, resulting in a deficit of US$26.5 billion. In 2002 the deficit
was US$21.1 billion. An important component of the budget deficit has been the
40 percent of state expenditures devoted to interest payments on debt.
Inflation in Turkey
Inflation has been a chronic problem in
Turkey’s economy. The rate for 2004, estimated at between 8.6 and 9.3 percent,
was the lowest since 1982. For the first three quarters of 2005, the rate was
about 8 percent. Between 1988 and 1999, the annual inflation rate varied between
60 percent and 90 percent.
Turkish Agriculture
Turkey is self-sufficient in most foods,
although some agricultural commodities are imported. The principal agricultural
exports are cotton, fruits, hazelnuts, tobacco, and wheat. Other important
agricultural products are barley, corn, oilseeds, olives, potatoes, sugar beets,
and tea. The most important livestock are cattle, chickens, goats, and sheep,
but livestock raising has declined significantly since the 1980s. The efficiency
of the agricultural sector is limited by the predominance of small,
non-mechanized farms on which a disproportionately large segment of the
population depends for its livelihood. Output varies substantially according to
weather conditions. The Southeastern Anatolia Project is an extensive series of
dams and canals in the Firat (Euphrates) Valley, scheduled for completion in
2010. The project will provide irrigation to improve agricultural productivity
in the southeast. State support, an important component of agricultural
enterprises, often has been poorly distributed and without proportionate
returns. In the early 2000s, the government reduced agricultural support and
began restructuring marketing systems.
Turkish Forestry
In 2000 the extent of Turkey’s forests was
estimated at 10.2 million hectares. However, the forests of eastern Anatolia are
not suitable for harvesting. The only usable timber comes from the Black Sea
coastal region, and timber does not make a significant contribution to the
economy. Because poor management and infrequent cutting have left many forests
over-mature, only about 20 percent of the total forested area is classified as
commercially exploitable. In 2003 Turkey’s timber industry produced a total of
16 million cubic meters of wood products, about 32 percent of which was fuelwood.
Forest protection by the state is handicapped by the dependence of local
populations on trees for fuel. In 2004 forestry contributed 0.4 percent of GDP.
Fishing in Turkey
Despite Turkey’s long coastline, fishing is not
an important contributor to the economy. The fishing industry is concentrated on
the coasts of the Black Sea and the Sea of Marmara, where output has been cut by
pollution and over-fishing. In 2002 Turkey’s fish catch totaled 567,000 tons, a
substantial decrease from the annual totals of the 1990s. Anchovies accounted
for more than 60 percent of the catch. A small aquaculture industry also exists.
In 2004 fishing contributed 0.4 percent of GDP.
Mining and Minerals (Natural
Resources) in Turkey
Turkey’s major mining operations, formerly
controlled by state-owned companies, have been increasingly privatized in the
early 2000s. During that period, aluminum, chrome, copper, and silver mines have
moved into the private sector. By far the most important mineral product is
lignite coal, of which Turkish mines yielded nearly 50 million tons in 2002 and
of which reserves are estimated at 8.4 billion tons. Turkey’s low-quality
lignite, burned mainly in power stations, is highly polluting. The output of
hard coal has declined in the early 2000s, reaching 3.3 million tons in 2002.
Hard coal reserves are estimated at 1.1 billion tons. The most important
non-fuel mineral is boron, of which Turkey has an estimated 60 percent of world
reserves, and production of which remains in state hands. Gold, of which Turkey
is estimated to have 450 tons of reserves, is receiving increased investment.
Marble is the most important mineral export.
Industry and Manufacturing
in Turkey
Turkey’s diverse manufacturing sector satisfies
domestic demand for a wide variety of products; the main manufactured exports
are consumer goods. Most manufacturing enterprises are privately owned, but the
size of such enterprises varies greatly, and the state has influenced the
relative growth of industries by providing disproportionate investment and
incentives. Multinational companies are present in many light and heavy
industries. Foreign auto companies—Fiat, Honda, Hyundai, Renault, and
Toyota—have plants in Turkey. Other industries such as appliances are mainly
Turkish-owned. A large proportion of the appliances, consumer electronics, and
vehicles manufactured in Turkey are exported. The largest privately owned
industrial company is the Arcelik firm, which manufactures a wide variety of
consumer products. Textiles and clothing are by far the largest products of
light industry, accounting for about one-third of exports. However, much of this
production is unreported because it is in the "informal" sector. The most
important textile product is cotton cloth. Besides textiles, the most important
consumer items produced are televisions, automobiles, refrigerators, washing
machines, and vacuum cleaners. The most important heavy industrial products are
processed fuels, steel, cement, tractors, and fertilizers.
Traditionally, the construction industry has
made an important contribution to the economy. However, the share of
construction’s contribution has declined since the late 1990s because of a
reduction in demand for domestic and foreign building projects and because of
Turkey’s 2001 economic crisis. Expansion resumed at a moderate rate in 2004. In
2003 the construction industry earned US$900 million in foreign contracts. In
the early 2000s, the industry’s foreign operations expanded, particularly in
Russia, Turkmenistan, Kazakhstan, Saudi Arabia, and Afghanistan.
Energy Resources in Turkey
Coal is the only fossil fuel that Turkey
possesses in abundance, meaning that large amounts of oil and natural gas are
imported. In the early 2000s, the domestic distribution of fuels and electricity
has been reformed to meet European Union standards. Distribution of natural gas,
nearly all of which is imported, is to be privatized by 2009. Since the 1990s,
Turkey has attempted to substitute cleaner natural gas for highly polluting
domestic coal. In the early 2000s, about two-thirds of the 1.1 billion cubic
feet of natural gas that Turkey imported was used by the electric power
industry. In 2005 authorities reduced their predictions of rapidly increasing
natural gas consumption for the rest of the decade. Russia is the main supplier
of natural gas; its share of total imports is expected to rise from the 2003
figure of 25 percent to 58 percent in 2010. Other major suppliers are Iran and
Azerbaijan. In 2004 Turkey’s domestic oil output was 43,000 barrels per day,
about half the level of 1990. Turkey imports about 90 percent of its oil, mainly
from Iran, Iraq, Russia, Saudi Arabia, and Syria. The demand for oil is expected
to grow steadily during the next decade. Turkey’s location along several
international oil and gas pipelines eases transport. Ceyhan, on the Black Sea
coast, is the terminus of the newly completed Baku-Tbilisi-Ceyhan oil pipeline,
which may gain Turkey substantial transit fees. However, recent downward
revisions of the Caspian’s estimated potential oil deposits may reduce the value
of that line.
Because the demand for electric power doubled
in the 1990s, Turkey became a net importer of electricity as domestic generating
capacity was unable to keep up with demand. Although in 2004 Turkey’s generating
capacity of 32,000 megawatts exceeded demand, another 13,000 megawatts of
capacity was being added in anticipation of increased demand in the following 10
years, and some power is imported from Turkmenistan. In the early 2000s,
domestic power supply was inefficient because new plants came online slowly and
industry privatization stalled. Turkey abandoned plans for its first and only
nuclear power plant in 2000. Since 2002 an independent Energy Market Regulatory
Authority has overseen privatization and distribution. This agency is considered
an important improvement in Turkey’s energy management.
The State of Services Sector
in Turkey
Banking, the most important of Turkey’s
financial services, has undergone significant changes in the early 2000s. The
current system is based on the banking law of 1999, which calls for transparency
and accountability. The financial crisis of 2001, for which the banks were
partly responsible, had a severe impact on the sector. The resulting
rationalization of the banking system reduced the number of banks by about
one-third to 36, leaving the five largest banks with more than 50 percent of
total assets. Those five private banks are part of large conglomerates with
interests in many other sectors. Three state banks control about 30 percent of
the industry’s assets. In 2004 government securities constituted about 40
percent of the assets of Turkish banks. Bad loans accounted for 14 percent of
assets, a very high figure. Long-term loans such as mortgages are rare, and both
credits and deposits are mostly very short-term. Since the 1990s, the Istanbul
Stock Exchange has been quite active, although political developments have
caused substantial volatility. In 2004 the exchange listed 309 companies,
including most of the largest in Turkey. Most of Turkey’s large insurance
companies are connected with banks or international insurance firms. Per capita
insurance expenditures are the lowest in the industrialized world. In 2004 total
premiums reached US$4 billion after a 20 percent increase in 2003. In 2005 a new
agency was expected to replace the National Treasury in regulating the insurance
industry.
Small enterprises have dominated retail trade.
However, in the early 2000s large Turkish chains such as Migros, Gima, and
Tansas and foreign companies such as Metro of Germany, Carrefour of France, and
Tesco of Britain occupied an expanding share of the retail sector. Turkey has
taken advantage of its wide variety of scenic and historic locations,
particularly along its southern and western coasts, to build a substantial
tourism industry based on local ownership of hotels and restaurants. Some 17.5
million tourists visited Turkey in 2004, an increase of 25 percent over 2003.
This activity generated revenues estimated at US$15.9 billion and provided an
important source of foreign currency.
Turkish Labour Force
In 2004 Turkey’s labour force was estimated at
24.3 million. However, a large part of this labour force works in the "informal
sector," making measurement of its activities difficult. In 2003 about 34
percent of the official workforce was occupied in agriculture, 43 percent in
services, and 23 percent in construction and industry. Industrial labour is
heavily unionized, and unions exert strong political influence. In the first
half of 2005, unemployment was estimated at 10.5 percent overall, the same rate
as in the previous three years, but unemployment among the youngest workers was
estimated at 20 percent. Another 6 percent of the workforce was considered
underemployed. Despite substantial wage increases in the 1990s and the early
2000s, the real value of wages has been depressed by inflation. However, in the
early 2000s a series of sharp increases brought the 2005 minimum wage to US$360
per month. Wage disparities are great between eastern and western Turkey. Women
account for only about one-quarter of the overall workforce but for 60 percent
of the agricultural workforce. Remittances from Turks working abroad, chiefly in
Germany and Saudi Arabia, have been an important source of national income.
However, after reaching a peak of US$5 billion in 1998, remittances in the early
2000s have been substantially lower. In 2004 an estimated 3 million workers
remitted slightly less than US$1 billion.
Foreign Economic Relations
of Turkey
Beginning in the late 1970s, Turkey has
liberalized what was a policy of import substitution and protection of domestic
industries by import restrictions. In the 1990s, export subsidies were
abolished. Beginning in the early 1990s, trade with the European Union (EU) has
increased slowly and steadily. Turkey was admitted to the World Trade
Organization (WTO) in 1995. In 1996 a customs union was established between
Turkey and the EU, abolishing tariffs on industrial products for both sides. An
agreement on agricultural products retains tariffs on some agricultural imports
from EU countries. In 1999 Turkey revised its customs legislation in accordance
with EU standards. Between 1990 and 2004, the EU share of Turkey’s exports
remained steady between 51 and 55 percent, and the EU share of Turkey’s imports
also remained steady between 44 and 47 percent. Throughout that period, Germany
remained Turkey’s primary trade partner, although that country’s percentage of
total trade (13.9 percent of exports and 13.6 percent of imports in 2004)
diminished steadily in the early 2000s. The level of trade with the United
States generally has increased since the late 1990s. In 2003 exports to the
United States increased by 11.5 percent over 2002, and imports increased by 10.4
percent. In 2004 the export share of the United States decreased slightly, and
its import share remained the same as in 2003. In 2004 the United States
accounted for 7.7 percent of Turkey’s exports and 5 percent of its imports. In
the early 2000s, a larger share of Turkey’s imports came from the Commonwealth
of Independent States (CIS), mainly because of reliance on natural gas from
Russia, than had been imported during the 1990s. In 2003 and 2004, Russia
accounted for 7.9 percent of Turkey’s imports, and the CIS as a whole accounted
for 6.3 percent of exports.
In the early 2000s, agricultural products
dropped below 10 percent of Turkey’s exports. Minerals and mineral products
accounted for about 5 percent. In 2004 finished textiles accounted for about 28
percent. Other important exported manufactured products were steel, construction
materials, appliances, televisions, and motor vehicles. The main customers for
Turkey’s exports were the EU countries, the United States, countries of the
Middle East, CIS countries, and Turkey’s neighboring countries in southeastern
Europe.
Substantial unofficial trade occurs with
neighboring countries of the Middle East and the CIS. The value of such trade in
2004 was estimated at US$4 billion. Fuels are the leading "official" imported
commodity. Others are chemical products and machinery and transport equipment.
Russia and Saudi Arabia are the chief suppliers of fuels. Other major suppliers
of imports are the EU countries, Switzerland, Japan, and China. Between 2002 and
2004, imports from China increased by 170 percent.
Trade Balance of Turkey
In 2004 Turkey’s imports had a total value of
US$94.5 billion, and its exports were valued at US$69.5 billion. Thus, the trade
deficit for 2004 was US$25 billion, continuing a persistent trend. Between 2000
and 2003, the trade deficits were, respectively, US$26.7 billion, US$10.1
billion, US$15.5 billion, and US$21.8 billion.
Balance of Payments of
Turkey
In the early 2000s, Turkey’s balance of
payments has varied widely, although it was negative every year from 2000
through 2004. The financial crisis of 2001 increased the balance-of-payments
deficit to US$12.9 billion, but in 2002 the deficit was only US$214 million. In
2004 the current account showed a deficit of US$15.3 billion, and the capital
and financial account showed a surplus of US$12.9 billion, creating a negative
overall balance of US$2.4 billion.
External Debt of Turkey
In 2004 Turkey’s medium- and long-term foreign
debt totaled US$129.8 billion, compared with US$124 billion in 2003 and US$116
billion in 2002. In the same year, short-term foreign debt increased from US$23
billion to US$31.9 billion.
Foreign Investment in Turkey
Foreign direct investment has been relatively
low, exceeding US$2 billion in only one year since 1999. The total for 2004 was
about US$2 billion. Portfolio investment, however, increased substantially in
2004 over previous years. A reform of foreign direct investment laws in 2003
streamlined procedures and improved the investment climate. A US$1.5 billion
power plant near İskenderun, completed in 2004 by the STEAG utilities company of
Germany, is the largest direct investment ever by a German company in Turkey.
Automotive companies in France, Italy, Japan, South Korea, and the United States
have plants in Turkey. In 2005 a Japanese consortium will begin building a
railroad tunnel under the Bosporus. The United States-based General Dynamics
Corporation has invested substantially in fighter plane manufacture in Turkey.
Currency and Exchange Rate
of Turkey
In January 2005, a currency reform established
the new Turkish lira, which was worth 1 million of the previous unit, the
Turkish lira. In January 2006, the exchange rate was 1.34 new Turkish liras to
the U.S. dollar. Thus, in 2005 the new lira was stronger against the dollar than
the old lira had been in 2002 and 2003, when the average rate was slightly more
than 1.5 million to the dollar.
Turkish Fiscal Year
Turkey’s fiscal year is the calendar year
For further in-depth
analysis of Turkish Economy:
|
|
