Discusses key economic indicators and trade statistics, which countries are dominant in the market, and other issues that affect trade.
Turkey has experienced a series of economic challenges over the last several years, most recently exacerbated by the COVID-19 pandemic. Currently the 19th largest economy (in nominal terms) with a sizeable population of over 83 million, Turkey has ambitions of becoming a top ten economy by 2023, the 100th anniversary of the Republic. Turkey’s favorable geographical position, its large middle class, a young population with a median age of 32, and a strong entrepreneurial spirit positively impact its investment climate. However, the realities of 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 goals. Nevertheless, more than 1,000 U.S. firms, including some of the United States’ largest and most recognized brands, are active in Turkey; many have been in the market for decades.
According to GoT statistics, the Turkish economy grew 1.8% in 2020. This represents a marginal uptick from 2019’s 0.9% increase, but otherwise a marked decrease from prior years’ growth, which was boosted by public and private infrastructure projects, including airports, highways, and new housing developments. More recently, the weight of large public and corporate debt (much of which is denominated in U.S. dollars [USD] or euros), along with financial market concerns about the near-term health of Turkey’s economy, has led to a sharp loss in value of the Turkish lira (TL). The roughly 24% devaluation in the TL relative to the USD from 2019 to 2020 compounded a 14% decrease in value from 2018 to 2019. As of December 2021, the lira had depreciated an additional 40% of its value relative to the USD. Against this backdrop, Turkey’s economy grew 7.4% in Q3 2021, despite lingering inflation and currency depreciation concerns.
U.S. goods and services trade with Turkey totaled an estimated $25.1 billion in 2020, down $1.7 billion from 2019. Exports were $12.8 billion; imports were $12.3 billion. The U.S. goods and services trade surplus with Turkey was $454 million, down $1.2 billion from 2019. U.S.-Turkish trade in goods reached $21 billion in 2020, a figure that has remained relatively consistent over the past several years. The U.S. deficit in trade in goods with Turkey grew from roughly $562 million in 2019 to $1 billion in 2020. As of June 2021, the U.S.-Turkey goods trade deficit stood at $2.5 billion. In 2020, according to GoT statistics, U.S. goods represented 5.25% of total Turkish imports and the United States was Turkey’s fourth-largest source of imports (behind Russia, Germany, and China). 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 approximately four million refugees from Syria, Iraq, Afghanistan, and other countries, making it the world’s largest host for displaced persons. In recent years, however, there has been an increase in geopolitical divergences. Turkey’s economic and democratic reforms have stalled or regressed which have impacted the commercial sphere.
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 the weakening Turkish economy. In 2019, Turkish Foreign Direct Investment (FDI) stock in the United States totaled $2.4 billion; roughly 40% less than the $3.4 billion the United States has invested in Turkey.
To map out the opportunities and to 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 (https://www.trade.gov/turkey) and the U.S. Embassy in Turkey website (https://tr.usembassy.gov/).