Despite the fact that the beginning of the 21st century was marked by a serious financial crisis for Turkey, the well-structured policies of the Justice and Development Party, which came to power and began its active work in 2002, not only helped the country emerge from this crisis but also attracted foreign investors to ensure sustainable economic growth. The following decade, starting in 2010, turned out to be less fruitful: economic growth gave way to structural slowdown, and Turkey failed to break out of the "middle income trap." Nonetheless, the country's leadership did not despair but instead began to develop other areas. In this article, we will explore the interesting and instructive experience of Turkey's socio-economic development.
GDP Dynamics and the National Currency Exchange Rate
Starting from a "happy" mark of $777 billion, Turkey’s GDP over the past decade formed an arc, barely exceeding $720 billion by 2020. Until the mid-2010s, the Turkish economy continued to climb "on inertia," almost reaching a trillion dollars in gross product. Afterward, we witnessed a series of challenging events—a structural crisis in the country’s economy, the conflict with Russia in 2015, the attempted coup in 2016—all of which led to a decline in foreign capital inflows, a cooling consumer market, and slower growth. Attempts at recovery after the crisis were undermined by the COVID-19 pandemic. As a result, the country ended the decade with an economy below its starting level.
During this entire period, the lira's exchange rate kept declining. In Russia, everyone often recalls the carefree years when the ruble was 30 to the US dollar; since 1998, it has dropped twelvefold. The situation with the Turkish lira was even more dramatic: the rate fell by almost 30 times, and just from 2010 to 2020, it weakened fivefold.
Changes in GDP per capita are largely determined by the overall macroeconomic dynamics, so this indicator also declined. During the period in question, per capita GDP decreased from $10,700 to $8,500, which, nevertheless, did not prevent Turkey from maintaining its position among the upper-middle-income countries as classified by the World Bank.
Growth in Trade Turnover
GDP Dynamics and the National Currency Exchange Rate
Starting from a "happy" mark of $777 billion, Turkey’s GDP over the past decade formed an arc, barely exceeding $720 billion by 2020. Until the mid-2010s, the Turkish economy continued to climb "on inertia," almost reaching a trillion dollars in gross product. Afterward, we witnessed a series of challenging events—a structural crisis in the country’s economy, the conflict with Russia in 2015, the attempted coup in 2016—all of which led to a decline in foreign capital inflows, a cooling consumer market, and slower growth. Attempts at recovery after the crisis were undermined by the COVID-19 pandemic. As a result, the country ended the decade with an economy below its starting level.
During this entire period, the lira's exchange rate kept declining. In Russia, everyone often recalls the carefree years when the ruble was 30 to the US dollar; since 1998, it has dropped twelvefold. The situation with the Turkish lira was even more dramatic: the rate fell by almost 30 times, and just from 2010 to 2020, it weakened fivefold.
Changes in GDP per capita are largely determined by the overall macroeconomic dynamics, so this indicator also declined. During the period in question, per capita GDP decreased from $10,700 to $8,500, which, nevertheless, did not prevent Turkey from maintaining its position among the upper-middle-income countries as classified by the World Bank.
Growth in Trade Turnover
Attention should also be paid to the high degree of openness of the Turkish economy, as evidenced by growing trade turnover. By 2020, the volume of foreign trade reached $389.1 billion, which is comparable to half of Turkey’s GDP. The main export industry is vehicle manufacturing, while Turkish-made household appliances, clothing, footwear, and fresh vegetables and fruits are also in demand on the world market. However, the share of high-tech products in exports in recent years is about 2.5%, raising the issue of the need for structural transformation in Turkey’s manufacturing sector. To address this, the government is actively employing various tools to attract foreign investors, developing special economic zones and technoparks.
Scientific Development and Digitalization
In terms of geography and climate conditions, Turkey has everything necessary for favorable development of virtually all types of alternative energy. Thus, hydroelectric power holds the greatest potential, while solar, geothermal, wind, and tidal power plants also play a key role. As a result, the share of renewable energy in total energy production has increased manifold (from 1.9% in 2010 to 17.6% by the end of the period).
During the period under review, Turkey managed to increase the share of R&D spending in GDP by one third. The private sector accounted for more than half of all spending on forward-looking developments. In the industrial sector, projects are mainly aimed at the development and implementation of innovative practices and increasing enterprise competitiveness. Nevertheless, the current level of R&D expenditure (1.03% of GDP) is clearly insufficient to ensure a structural transformation of industry and boost medium- and high-tech production.
Digitalization of the economy was identified as one of the national development strategy priorities for Turkey in the second decade of the 21st century. Despite a shortage of technology, which prevents the country from keeping pace with the most advanced IT solutions, Turkey succeeded in raising the digital economy’s share to 6.5% of GDP by 2020.
Social Indicators
Scientific Development and Digitalization
In terms of geography and climate conditions, Turkey has everything necessary for favorable development of virtually all types of alternative energy. Thus, hydroelectric power holds the greatest potential, while solar, geothermal, wind, and tidal power plants also play a key role. As a result, the share of renewable energy in total energy production has increased manifold (from 1.9% in 2010 to 17.6% by the end of the period).
During the period under review, Turkey managed to increase the share of R&D spending in GDP by one third. The private sector accounted for more than half of all spending on forward-looking developments. In the industrial sector, projects are mainly aimed at the development and implementation of innovative practices and increasing enterprise competitiveness. Nevertheless, the current level of R&D expenditure (1.03% of GDP) is clearly insufficient to ensure a structural transformation of industry and boost medium- and high-tech production.
Digitalization of the economy was identified as one of the national development strategy priorities for Turkey in the second decade of the 21st century. Despite a shortage of technology, which prevents the country from keeping pace with the most advanced IT solutions, Turkey succeeded in raising the digital economy’s share to 6.5% of GDP by 2020.
Social Indicators
In the past 20 years, Turkey has achieved internationally significant success in eradicating poverty. This was facilitated by the social policies of the Justice and Development Party, thanks to which the number of poor and low-income citizens decreased, and the social welfare system was improved—providing assistance to disadvantaged segments of the population in the form of food, fuel, and subsidies for healthcare and education. The 2020 level makes it possible to say that the goal of eradicating extreme poverty has largely been achieved.
Nevertheless, the problem of income inequality remains relevant. Evidence for this is the increase in the number of dollar millionaires. Over ten years, their number has tripled: 114,000 in 2020 compared to 37,000 at the beginning of the period.
In summary, it should first be noted that dry GDP figures do not reflect the qualitative changes occurring in the socio-economic sphere. Turkey is already the largest country in its region, and, upon completing the transition to the production of high-tech products, the country will be able to make a rapid leap in development.
About RASPP
Nevertheless, the problem of income inequality remains relevant. Evidence for this is the increase in the number of dollar millionaires. Over ten years, their number has tripled: 114,000 in 2020 compared to 37,000 at the beginning of the period.
In summary, it should first be noted that dry GDP figures do not reflect the qualitative changes occurring in the socio-economic sphere. Turkey is already the largest country in its region, and, upon completing the transition to the production of high-tech products, the country will be able to make a rapid leap in development.
About RASPP
The Russian-Asian Union of Industrialists and Entrepreneurs (RASPP) is a public organization that implements government cooperation programs aimed at strengthening collaboration between public and business associations in Russia and Asian countries.
One of RASPP’s most important tasks is to support the business community of Russia and Asia in developing and strengthening multilateral relations, as well as attracting investment into the Russian Federation. Over 10 years of work, RASPP has attracted more than $800 billion in direct foreign investment to Russia and increased trade turnover by more than $1 billion.
RASPP specializes in business solutions in the areas of import, export, investment attraction, and implementation of investment projects in Asian countries. It also organizes business events and business missions in these areas, including assistance in sourcing industrial equipment in China free of charge.
Advantages:
For consultations, you can send a request by email to business@raspp.ru or by phone at +7-963-963-8363. Natalia Sapunova, Head of the Trade and Economic Cooperation Department at RASPP, will be happy to assist you.
One of RASPP’s most important tasks is to support the business community of Russia and Asia in developing and strengthening multilateral relations, as well as attracting investment into the Russian Federation. Over 10 years of work, RASPP has attracted more than $800 billion in direct foreign investment to Russia and increased trade turnover by more than $1 billion.
RASPP specializes in business solutions in the areas of import, export, investment attraction, and implementation of investment projects in Asian countries. It also organizes business events and business missions in these areas, including assistance in sourcing industrial equipment in China free of charge.
Advantages:
- Over 10 years of experience
- Russian-speaking specialists in China
- Turnkey supply chain organization
For consultations, you can send a request by email to business@raspp.ru or by phone at +7-963-963-8363. Natalia Sapunova, Head of the Trade and Economic Cooperation Department at RASPP, will be happy to assist you.