Discusses key economic indicators and trade statistics, which countries are dominant in the market, and other issues that affect trade.
The Republic of Turkey, currently with the 20th largest nominal gross domestic product (GDP) and 11th largest GDP based on purchasing power parity (PPP), has long drawn the presence of U.S. corporations across a myriad of sectors. Turkey’s sizable, young population (of approximately 84 million), combined with the country’s highly favorable geostrategic position, positively impact its investment climate. However, economic challenges catalyzed by the COVID-19 pandemic loom large. Steep inflation, a weakening currency, fluctuating unemployment, and an increase in protectionist and populist measures, including import tariffs and localization efforts, complicate Turkey’s ability to reach its economic goal of becoming a top-10 economy within several years. Nevertheless, more than 1,000 U.S. firms, including many of the United States’ largest and most recognized brands, are active in Turkey and have been for decades.
According to Government of Turkey (GoT) statistics, the Turkish economy grew 11% in 2021, up 9.2% from 2020. Turkey’s economy in 2021 was the fastest growing among all G20 countries, spurred largely by a sharp increase in exports and the relaxation of COVID-19-related measures. Turkey’s interest rate cuts receive credit for supporting demand but caused the Turkish lira (TL) to shed approximately 44% against the dollar. Turkey now confronts an ongoing currency crisis which has amplified macro-financial instability. Spillover from Russia’s invasion of Ukraine will likely adversely impact the Turkish economy. Experts anticipate lower economic growth in 2022 of 1.4%.
Total trade between the United States and Turkey reached nearly $28 billion in 2021, up nearly 33% from 2020. Exports totaled approximately $11.9 billion; imports were approximately $15.9 billion. A marked increase in exports to Turkey of LNG; organic chemicals; and certain iron and steel products; as well as an increase in imports to the U.S. of precious stones and metals; nuclear reactors and machinery; vehicle parts; and certain iron and steel products drove the increase in value of bilateral trade.
In 2021, according to GoT statistics, U.S. goods represented close to 5% of total Turkish imports and the United States was Turkey’s fourth largest source of imports (behind China, Russia, and Germany). An increase in tariffs in 2018 and 2019 on a range of U.S. products may put some U.S. exporters at a disadvantage relative to their European competitors, who share a Customs Union agreement with Turkey and therefore do not face the same trade barrier. Still, U.S. brands overall continue to enjoy widespread favorability and recognition among Turkish consumers.
For several decades, the United States and Turkey have enjoyed a strong political and military relationship. Both countries partner closely on a range of regional and international concerns. A NATO member since 1952, Turkey has supported missions around the world, including Afghanistan, Iraq, the Balkans. Notably, Turkey has received over four million refugees from Syria, Iraq, Afghanistan, and other countries, making it the world’s largest host for refugees. In recent years, however, there has been an increase in geopolitical divergences, though the economic relationship has weathered shifts in the overall bilateral relationship.
U.S. firms, many with the assistance of the U.S. Commercial Service in Turkey (CS Turkey), continue to pursue energy, aerospace, defense, infrastructure, transportation, healthcare, and ICT projects throughout the country. Furthermore, often with the assistance of the U.S. Government’s SelectUSA Program, Turkish companies continue to invest in the United States, in part to act as a potential buffer against a weakening Turkish economy. In 2019, Turkish Foreign Direct Investment (FDI) stock in the United States totaled $2.4 billion; roughly 40% less than the U.S. FDI stock of $3.4 billion invested in Turkey that year. According to the Central Bank of Turkey’s balance of payments data, Turkey attracted a total of $5.67 billion of FDI in 2020, down nearly $200 million from 2019 values. This figure is the lowest FDI figure for Turkey in the last 16 years.
To map out the opportunities and better understand the challenges of doing business in Turkey, U.S. firms, both large and small, are encouraged to contact CS Turkey for market information, updates on regulatory issues, major projects, and business developments. With offices in Ankara, Istanbul, and Izmir, we encourage business visitors to meet with our multilingual, sectoral-focused business development teams for individualized market consultations. For more information, visit the CS Turkey website and the U.S. Embassy in Turkey website.