Turkey WT/TPR/S/259 
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  I. ECONOMIC ENVIRONMENT 
(1) MAJOR FEATURES OF THE ECONOMY  
1. The Republic of Turkey covers an area of just over 784,000 square kilometres (including 
lakes) with a population of nearly 73 million (2010).1  Around 76% of the inhabitants live in urban 
areas; the largest cities being Istanbul (12.6 million), Ankara (4.7 million), and Izmir (3.7 million).  
Some 4 million Turks live abroad.2  The population growth has been declining steadily in recent 
years, and currently averages 1.3% per annum.  Over 26% are in the 0-14 year age group, and life expectancy at birth is 74.3 years at present.  In 2010, Turkey ranked 83
rd among 169 countries with 
comparable data on the Human Development Index.3   
2. Services, employing nearly 50% of the labour fo rce in Turkey, constitute the largest share of 
Turkey's GDP (60%), followed by manufacturing (16%),  and agriculture (more than 8%).  Tourism is 
a major earner of foreign exchange for Turkey.  The manufacturing sector is outward oriented, and 
Turkey is a major world producer and exporter of several agricultural commodities.  The agriculture 
sector remains an important source of employment in Turkey's rural areas, providing work for around 6 million people.   
3. As half of Turkey's population is under the ag e of 29, the labour market needs to absorb 
1 million new entrants every year.  The female partic ipation rate in employment remains low.  While 
72.9% of the male population within the working age are employed, the rate for women is 30.3%. 
4. Turkey introduced the new Turkish lira on 1 January 2005, removing six zeros from the old 
currency.  The word "new" was stru ck with effect from 1 January 2009,  and the official name is the 
Turkish lira (TL).  Turkey accepted the obligations of  Article VIII of the IMF Articles of Agreement 
on 22 March 1990, and moved from a crawling peg to a floating exchange rate system on 
22 February 2001. 
(2) R
ECENT ECONOMIC DEVELOPMENTS  
5. After a highly volatile performance in 1990s, the Turkish economy experienced its most 
severe recession since the 1940s in 2001.  Significant structural reforms were introduced in response 
to the 2001 crisis, and Turkey subsequently entere d an unusually long period of sustained growth and 
economic stability.4  A strong appreciation of the Turkish lira in 2006 had a dampening effect on 
economic growth in 2007, but the economy was still expanding until th e arrival of the global financial 
crisis in mid 2008. 
6. Initially, the unprecedented decline in forei gn demand prompted a free fall in Turkey's 
exports, in turn affecting output and investment .  The loss of business and consumer confidence 
                                                      
1 The population data is based on the "Address Based Population Registration System" as of 
31 December 2010. 
2 The migration of workers began with the conclusion of an agreement with the Federal Republic of 
Germany in October 1961, followed by similar agreements with other European countries in the first half of the 
1960s.  Turkish workers increasingly picked up jobs in the Middle East from the mid 1970s, and after 1990 also in the Russian Federation.   
3 UNDP online information, "Human Development Index".  Viewed at:  hdrstats.undp.org/en/countries/ 
profiles/TUR.html 
4 The reforms included fiscal discipline; tight monetary policy with inflation targeting; a floating 
exchange-rate regime; a strengthened banking system; public sector reform; privatization; and market 
liberalization.  For details, see WTO (2003).   WT/TPR/S/259 Trade Policy Review 
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  amplified the shock.  Turkey's GDP fell by nearly 5% in real terms between 2008 and 2009 
(Table I.1).  Although the unemployment rate incr eased from 11% to 14%, the rise was mitigated by 
employment support measures and wage adjustments.5   
Table I.1 
Main economic indicators, 2006-10  
  2006 2007 2008 2009 2010 
Miscellaneous      
GDP (TL billion) 758.4 843.2 950.5 952. 6 1,103.7 
GDP (US$ billion) 526. 4 648.8 742.1 616.7 734.9 
Real GDP growth rate (%) 6.9 4.7 0.7 -4.8 9 
Population, total ('000)a 69,395 70,215 71,095 72,050 73,003 
GDP per capita (US$)b 7,583 9,234 10,440 8,578 10,043 
Unemployment, total (% of total labour force) 10.2 10.3 11.0 14.0 11.9 
Consumer price index (end of period;  % change) 9.7 8.4 10.1 6.5 6.4 
Monetary sector      
Nominal growth of M2 broad money (%) 23.4 15.4 27.5 12.9 19.0 
Money and quasi money (M2) as % of GDP 39.2 40.7 46.0 51.9 53.3 
Average nominal treasury bill intere st rate (%) 18.1 18.4 19.2 11.6 8.1 
GDP by economic activities at current prices  (%) 
Agriculture 8.3 7.6 7.6 8.3 8.4 
Industry 20.1 20.0 19.8 19.1 19.2 
     Mining and quarrying 1.2 1.2 1.4 1.5 1.4 
     Manufacturing 17.2 16.8 16.2 15.2 15.5 
     Electricity 1.8 1.9 2.2 2.4 2.3 
Services 58.3 60.3 61.0 61.1 59.9 
Otherc 13.2 12.1 11.7 11.5 12.5 
Government finance (% of GDP) 
Public sector primary balance 4.7 3.1 1.6 -1.0 -0.8d 
Public sector borrowing requirement 1.9 -0.1 -1.6 -5.1 -2.3d 
Net debt of public sector 34.0 29.5 28.2 32.5 28.8 
National accounts (% of GDP) 
Private consumption 70.5 71.3 69.8 71.5 71.3 
Public consumption 12.3 12.8 12.8 14.7 14.3 
Gross fixed capital formation 22.3 21.4 19.9 16.9 18.7 
Change in inventories -0.2 -0.4 1.9 -1.9 1.2 
XGS / GDP (%) 22.7 22.3 23.9 23.3 21.1 
MGS/ GDP (%) 27.6 27.5 28.3 24.4 26.6 
Memorandum      
Current account balance (US$ billion)  -32.2 -38.4 - 42.0 -14. 0 -47.7 
Gross external debt (% of GDP; end of period)e 39.5 38.5 37.8 43.5 39.4 
Gross external debt (US$ billion)e 207.7 249.5 280.4 268.4 289.4 
Gross foreign reserves (US$ billion) .. 76.2 74.0 73.8d 81.3f 
Official net foreign reserves (U S$ billion) 63.3 76.4 74.2 74.8 86.0 
Table I.1 (cont'd) 
                                                      
5 While the number of workers in industry declined from 2008 to 2009, agricultural employment 
increased.  Employment increase d in all sectors in 2010.   Turkey WT/TPR/S/259 
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    2006 2007 2008 2009 2010 
Trade in goods and services (% of GDP) 49.9 49.3 52.1 47.6 48.0 
Inward FDI stock (% of GDP) 18.1 23.6 10.8 22.8 24.7 
Outward FDI stock (% of GDP) 1.7 1.9 2.4 3.6 2.9 
.. Not available. 
a Mid-Year Population, Turkstat. b 2011 Annual Programme, Ministry of Development. 
c Including net taxes (taxes minus subsidies). 
d Preliminary. e Provisional due to revisions in foreign debt  data, figures may change retrospectively. 
f Projection. 
Source:  CBRT Electronic Data Delivery System.  Viewed at :  http://evds.tcmb.gov.tr/yeni/cbt-uk.html; Turkstat, 
Undersecretariat of Turkish Treasury; and IMF (2010), Turkey: Staff Report for the 2010 Article IV Consultation 
and Post-Program Monitoring – Supplementary Informati on; Staff Report; Informational Annex; and Public 
Information Notice on the Executive Board Discussion , IMF Country Report No. 10/278.  Viewed at: http://www. 
imf.org/ external/pubs/ft/scr/2010/cr10278.pdf 
7. The banking sector proved robust, and the fi nancial position of the Turkish Government 
allowed for discretionary stimulus of the economy.  Turkey's economic recovery, led by growth in 
private consumption and a rebound in exports, began in the second quarter of 2009 and continued 
through 2010.6  Real GDP is estimated to have risen by  9% in 2010, and a 7.5% increase has been 
projected for 2011.   
8. Identified as a source of macroeconomic imba lances in the past, Turkey's fiscal position 
improved markedly from 1999 onwards.  The public  sector primary balance was consistently in 
surplus from 2000 through 2008 and the overall balance,  although in deficit, was kept below 2% of 
GDP from 2005 through 2008.  As a consequence, ne t public sector debt, which had stood at 61.5% of 
GDP in 2002, had fallen to 34% in 2006 and had dropped further (to 28.2%) by 2008.  Although the 
Government's fiscal position deteriorated as a result of the global crisis, the primary and overall 
deficits were contained, and Turkey has been able to recover from the downturn with net public sector 
debt remaining at less than 35% of GDP.   
9. Turkey's gross external debt also declined  steadily during the last decade, from a level 
equivalent to 56.2% of GDP in 2001 to less than 40%  in 2008.  While Turkey's gross external debt 
increased from US$250 billion in 2007 to US$290 billion in  2010, the level of external debt remains 
around 40% of GDP.  During the financial crisis , long-term capital inflows dried up and were 
replaced by short-term funding and portfolio invest ments, i.e. non-resident purchases of government 
debt securities and short-term loans and deposits from foreign banks to Turkish banks.  Longer-term 
capital appears to be returning to Turkey along with  the economic recovery, but the crisis highlighted 
the challenges posed by rapid changes in business and investor sentiment.   
10. The inflation-targeting framework pursued by  the Central Bank of Turkey since 2001 has 
been successful in driving down annual consumer pr ice inflation from 29.7% in 2002 to 10% or less 
since 2004.  Movements year-to-year are influenced by  fluctuations in energy prices, the strength of 
domestic demand, and devel opments in the real effective exchange  rate of the Turkish lira.  Using 
2003 as the basis, the lira appreciated by nearly 20% until the end of 2007, then went into a decline, 
which took the (CPI-based) real effective exchange rate  close to the 2003 level in the early days of the 
                                                      
6 Turkey's GDP fell nearly 14% (p eak-to-trough) during the crisis; the steepest decline in the OECD 
area.  The subsequent recovery has also been the most pronounced among OECD countries (OECD, 2010b). WT/TPR/S/259 Trade Policy Review 
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  financial crisis.  A steady appreciation of 10%  from early 2009 until the end of 2010 has been 
followed by a significant decline in 2011.   
(3) TRADE PERFORMANCE  
11. Turkey's current account has not been in surplu s since 2001, and the deficit rose steadily until 
2008, primarily due to a widening gap between the va lue of exports and imports of merchandise.  A 
significant contraction of imports in 2009 reduced the current account deficit to US$14 billion for the 
year, but the subsequent economic recovery has once again been accompanied by a growing deficit, equal to 6.5% of Turkey's GDP in 2010.   
12. The contraction in foreign demand brought a 22.6%  decline in Turkey's exports of goods from 
2008 to 2009.  Nevertheless, Turkey's exports ro se threefold in U.S. dollar terms between 2002 and 
2010.  Turkey is still predominantly an exporter of manufactured goods, in particular automotive 
products, textiles and clothing, iron and steel, a nd chemicals.  However, the overall share of 
manufactures in Turkey's exports has declined fro m a peak of 84% in 2004 to 78.3% at present 
(Table AI.1 and Chart I.1).
7  Exports of agricultural products, mostly food, have been rising over the 
last three years and represent around 11% of Turkey's  exports at present, the same share as in 2002.   
13. The European Union, led by Germany, the United Kingdom, Italy, and France, remains the 
principal market for Turkish goods.  However, the EU  share in Turkey's exports declined by nearly 
10 percentage points (from 60.1% to 50.8%) from 2006 to 2010, reflecting a successful shift in 
Turkish export sales to neighbouring countries (Iraq, Iran, Syria and Azerbaijan) as well as to growth 
markets in the Middle East, North Africa, certain CIS countries, and Asia since 2008 (Table AI.2 and 
Chart I.2).   
14. Turkey's merchandise imports exceeded US$20 0 billion in 2008, representing a five-fold 
increase in seven years.  Following a 30% fall in 2 009, imports were back at US$186 billion in 2010.  
The structure of Turkey's imports has largely re mained unchanged over the last five years, the 
principal items being machinery and transport equipm ent (29%), fuels (21%), chemicals (14%), and a 
broad range of consumer goods (Table AI.3).  Howeve r, Turkey's imports reflect a significant degree 
of intra-industry trade whereby intermediate goods are imported, processed and sold for export, 
notably in motor vehicles and accessories, iron and steel, and machinery.   
15. Although imports from the United States, China, India, and Kazakhstan have risen 
significantly since 2006, the EU (primarily Germany,  Italy and France) continues to be the main 
source of Turkey's imports (Table AI.4 and Chart I.2).  In 2010, the Russian Federation, Germany, 
China, the United States, and Italy all provided goods worth more than US$10 billion to Turkey.   
16. On a bilateral basis, Turkey ra n a surplus in its trade with c ountries such as Iraq, the United 
Kingdom, the UAE, and Egypt in 2010.  By contrast, substantial deficits we re recorded with the 
Russian Federation (US$17 billion), China (US$15 b illion), the United States (US$8.6 billion), and 
Germany (US$6 billion).  Turkey's merchandise trade is sensitive to movements in foreign exchange 
rates.  Due to importation of fuels, and trade with countries in East Asia, Turkey's imports are mainly 
denominated in U.S. dollars (over 60%).  On the other hand, exports of manufactures to traditional 
markets result in nearly 50% of Turk ey's exports being settled in euros. 
                                                      
7 Textiles and clothing, which accounted for 40% of Turkey's merchandise ex ports in 1995, and 26% 
in 2005, currently holds a share of 19%.  The share has been rising slightly over the last three years.   Turkey WT/TPR/S/259 
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  Other semi-
manufactures
10.4Textiles
7.9Other consumer
goods
5.9Chart I.1
Composition of merchandise trade, 2006 and 2010
2006 2010
(a)    Exports, including re-exports (f.o.b.)
Non-electrical 
machinery
4.0
Manufactures
81.0
Total:   US$85.5 billion Total:  US$113.9 billion  
(b)    Imports (c.i.f.)
Chemicals
13.2Manufactures
63.9
Iron and steel
5.8Other electrical 
machines
3.7
Other mining
7.0Fuels
20.7
Other semi-
manufactures 
5.1Other consumer
goods
4.8Office machines & 
telecommucation
5.5Textiles
3.4Other 
manufactures
3.9
Non-electrical
machinery
7.1Automotive 
products
8.3Iron and steel
5.2Other consumer 
goods  
4.7Textiles
3.6Other 
manufactures
6.7Other
1.6
Office machines & 
telecommunication 
equipment
4.6Agriculture
5.2
Other semi-
manufactures
4.9
Chemicals
13.7Manufactures
62.7
Total:   US$139.6 billion Total:   US$185.5 billion Per cent
Manufactures
78.3Other electrical 
machines
6.3
Clothing
14.1Non-electrical 
machinery
4.0 Mining
7.6
Iron and steel
8.5
Other electrical 
machines
3.9Automotive 
products
12.1Mining
8.4Agriculture
11.1
Non-electrical 
machinery
9.2
Source :  UNSD, Comtrade database (SITC Rev.3) a nd data provided by the Turkish authorities.Other 
3.2
Mining
28.8Other 
manufactures
5.5
Automotive
products
13.7
Automotive products
9.3Chemicals
4.6Other 
manufactures
7.8
Mining
27.7Agriculture
6.9Other
1.2Other
2.2
Other mining
8.1Fuels
20.7Chemicals
6.0
Other electrical 
machines
5.2Agriculture
10.1
Clothing
11.2
Iron and steel
9.0Other semi-manufactures
8.9Textiles
8.9Other consumer
goods
5.3
 WT/TPR/S/259 Trade Policy Review 
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  Chart I.2
Direction of merchandise trade, 2006 and 2010
2006 2010
(a)    Exports, including re-exports (f.o.b.)
Asia  
3.5
CIS 7.7
Total:   US$85.5 billion Total:  US$113.9 billion
(b)    Imports (c.i.f.)
Japan 2.3
EU(27)
42.6
CIS 16.5Middle 
East 7.1Other America
2.2
Korea 2.5Other
1.0
EU(27)
38.9Europe
41.4Middle 
East 8.0Asia
20.4Other America 
2.4
Africa
3.5Iran 4.1Korea 2.6Japan 1.8United States
6.6
Total:   US$139.6 billion Total:   US$185.5 billionPer cent
Other Middle East  
7.5
Other CIS
4.9Africa
5.3United States
5.9
Other Europe
4.1
Other Asia  
6.7United States 3.3
Source :  UNSD, Comtrade database (SITC Rev.3) and data provided by the Turkish authorities.Other Europe
2.5EU(27)
46.3
CIS
16.5Asia
17.4
Other Europe
3.4Other Middle East 
3.1EU(27)
56.0
Other 
Europe
4.5Other America
2.0
Russia
11.6Africa 
5.3
Russia 4.1
Iran 4.0Iraq
5.3
Other CIS
3.7Other
1.1
China 6.9Other CIS 4.9Other America
1.5
Russia
12.8Other Middle East
3.9Other   
2.5Other 
4.1
Africa 8.2
Other Asia 
5.7
Europe 46.0China 9.3United States 4.5Iran 2.7U.A.E. 2.3
Europe
60.1Russia
3.8Other CIS 3.9Iraq  3.0Other Middle East  5.4
Iran 1.2
Europe
50.8
CIS 9.0Middle 
East 
18.4U.A.E. 2.9Asia   
5.8
Middle 
East 
11.9
 Turkey WT/TPR/S/259 
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  17. Turkey continues to be a net exporter of ser vices due to its significant surplus in travel 
services, averaging US$16 billion per year from 2006 to 2010.  Turkey is normally also a net exporter of construction and transportation services, and a net importer of insurance, banking and other 
business services (Table I.2).  Worker remittances,  which were providing foreign exchange worth 
approximately US$5 billion each year to Turkey  in the late 1990s, now amount to less than 
US$1 billion annually.   
Table I.2 
Balance of payments, 2006-10 
(US$ billion) 
  2006 2007 2008 2009 2010 
Current account -32.2 -38.4 -42.0 -14.0 -47.7 
Goods -41.1 -46.9 -53.0 -24.9 -56.4 
Exports 93.6 115.4 140.8 109.6 120.9 
Imports -134.7 -162.2 -193.8 -134.5 -177.3 
Services 13.6 13.3 17.3 16.7 14.6 
Credit  25.5 28.9 35.1 33.5 34.1 
Debit -12.0 -15.6 -17.8 -16.7 -19.4 
Transportation (net) 0.3 -0.4 -0.2 1.3 0.7 
Travel (net) 14.1 15.2 18.4 17.1 16.0 
Construction services (net) 0.9 0.8 1.0 1.1 0.9 
Insurance services (net) -0.6 -0.9 -0.7 -0.5 -0.5 
Financial services (net) -0.2 -0.2 -0.1 -0.4 -0.2 
Other business services (net) -0.4 -0.8 -1.0 -1.3 -1.3 
Government services (net) -0.9 -0.7 -0.8 -0.8 -0.9 
Other services (net) 0.5 0.4 0.7 0.3 0.0 
Income -6.7 -7.1 -8.4 -8.2 -7.3 
Credit  4.4 6.4 6.9 5.2 4.5 
Debit -11.1 -13.5 -15.3 -13.4 -11.8 
Current transfers 1.9 2.2 2.1 2.3 1.4 
Official transfers 0.6 0.8 0.7 1.2 0.6 
Workers remittances 1.1 1.2 1. 4 0.9 0.9 
Capital and financial account 32.1 36.7 37.3 8.9 43.0 
Capital account 0.0 0.0 -0.1 0.0 -0.1 
Financial account 32.1 36.7 37.3 9.0 43.1 
Direct investment 19.3 19.9 17.0 6.9 7.8 
Abroad -0.9 -2.1 -2.5 -1.6 -1.5 
In Turkey 20.2 22.0 19.5 8.4 9.3 
Portfolio investment 7.4 0.8 -5.0 0.2 16.1 
Assets -4.0 -1.9 -1.2 -2.7 -3.5 
Liabilities 11.4 2.8 -3.8 2.9 19.6 
Other investment 11.5 23.9 24.3 2.0 32.0 
Assets -13.5 -5.0 -12.1 11.0 7.0 
Liabilities 25.0 28.9 36.4 -9.0 24.9 
Reserve assets -6.1 -8.0 1.1 -0.1 -12.8 
Net errors and omissions 0.2 1.8 4.7 5.1 4.7 
Source:  CBRT online information.  View ed at:  http://www.tcmb.gov.tr.  WT/TPR/S/259 Trade Policy Review 
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  (4) OUTLOOK  
18. According to the Turkish Government's Me dium-Term Programme of the for 2012-14, the 
main objectives are to sustain growth, increase empl oyment, improve public balances, and reduce the 
current account deficit to increase Turkey's welf are level.  The programme is accompanied by a 
Medium-Term Fiscal Plan setting specific targets for the central government budget.8  Public 
expenditures are to be reviewed carefully to maximize the resour ces available for economic growth 
led by the private sector.  The fiscal plan foresees a steady improvement in the public sector primary 
balance to reach a surplus of 1.5% in 2014, with the public sector borrowing requirement declining to 
0.4% of GDP.9   
19. The programme and fiscal plan are based on macroeconomic indicators suggesting that the 
Turkish economy should expand by 4.5%, 4%, and 5% in  real terms over the next three years, led by 
rising output in services and in manufacturing indu stries.  The annual consumer price inflation is 
expected to average around 6% on a declining trend.  The current account deficit is projected to fall 
from 8% of GDP in 2012 to 7.5% in 2013, and 7% in 2014.   
20. Over the medium and longer term, Turkey inte nds to focus on infrastructure investments 
supporting efficiency and productivity, notably inv estments in education, health, research and 
development, transportation, energy, the provision  of drinking water, and the development of 
information and communication technologies.  Priority  is also given to projects to reduce regional 
imbalances. 
21. With a GDP of more than US$750 billion, Turkey is currently the 17th largest economy in the 
world.  In 2009, Turkey ranked 22nd among the world's exporters of merchandise and 14th amongst 
exporters of services.  For imports, Turkey's ranking was 24th (merchandise) and 26th (services).10  The 
government of Turkey has set ambitious targets for 2023, marking the 100th anniversary of the 
establishment of the Turkish Republic.  The 2023 E xport Strategy provides a general framework for 
the objectives.  The Ministry of Economy, the Ministry of Development, and the Turkish Exporters Assembly are preparing detailed roadmaps.
11  Amongst its goals, Turkey is aspiring to be among the 
world's top ten economies, with a GDP per capita of  more than US$25,000, as well as to reach exports 
worth US$500 billion annually. 
                                                      
8 The three-year Medium-Term Fiscal Plan has been prepared by the Ministry of Finance and finalized 
by the High Planning Council.   
9 Data for the first months of 2011 indicate that the Government is ahead of its targets due to rapidly 
rising tax receipts, while the growth in  expenditures is being contained.    
10 WTO (2009).  Turkey's position is calculated treating the European Union as one entity and 
excluding intra-EU trade.  Turkey's standing remained the same as in 2005  except for services imports, where 
Turkey slipped two places.   
11 The Turkish Grand National Assembly approved the Long-Term Development Strategy (2001-2023) 
and the 8th Five-Year Development Plan (2001-05) on 27 June 2000.  The Long-Term Development Strategy, 
which set the target for Turkey to enter the world's t op ten economies, is the main guide for the economic and 
social transformation.  The objective is retained in the Ninth Development Plan.  Targets are prioritized and 
incorporated in three-year medium-term programmes and annual programmes.  Related governmental 
organizations prepare, coordinate, and implement sectoral strategies considered to be roadmaps for the specified 
targets.