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 few years, most recently exacerbated by the COVID-19 pandemic. Currently the 19th largest economy (in nominal terms), Turkey’s ambitions to become a top ten economy by 2023 (the 100th anniversary of the Republic) will continue to be stymied by a decrease in consumer demand, a weakening currency, fluctuating unemployment and an increase in protectionist and populist measures, including import tariffs and localization efforts. However, given its location at the crossroads of Europe and the Middle East, Turkey still presents opportunities for American firms. In addition to its advantageous geographical position, Turkey has a large middle class, a youthful population (median age is 31), and a strong sense of entrepreneurism. Nearly 1,900 American firms, including some of the United States’ largest and most recognized brands, are active in Turkey; many have been in the market for decades. Moreover, more than 60 U.S. companies have established offices in the country.
According to Turkish government statistics, the Turkish economy grew 0.9% in 2019, a marked decrease from prior years’ growth, which was boosted by public and private infrastructure projects, including airports, highways and new housing developments. Now, the weight of large public and corporate debt (much of which is denominated in dollars or euros), along with financial market concerns about the near-term health of Turkey’s economy, has led to a further loss in value of over 20% in the Turkish lira against the dollar so far in 2020 (as of September 1). For 2020, the economy is expected to contract for the first time in over a decade, with economists’ estimates varying from 3% to 5%, before recovering to up to 5% in 2021.
U.S.-Turkish trade in goods reached $20.7 billion in 2019, a figure that has remained relatively consistent over the last few years. The balance, however, shifted from annual surpluses to a roughly $600 million trade deficit in 2019. In 2019, according to Turkish government statistics, U.S. goods represented 5.6% of total Turkish imports and the United States was Turkey’s 4th 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 to European exporters due to Turkey’s Customs Union with the European Union. Nevertheless, 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. Turkey is an ally in the fight against the Islamic State (ISIS). Notably, Turkey provides significant assistance with the related humanitarian crisis and hosts over 3.4 million refugees from Syria, Iraq and other countries, making it the world’s largest host for refugees. That said, in recent years, there has been a marked increase in geopolitical divergences, which have impacted the commercial sphere.
American firms, many with the assistance of the U.S. Commercial Service in Turkey (CS Turkey), continue to pursue energy, aerospace, defense, infrastructure, transportation and health care and ICT projects throughout the country. Furthermore, often with the assistance of the U.S. Government’s SelectUSA Program, Turkish companies continue to look at investing in the United States, in part to act as a potential buffer against the weakening Turkish economy. In 2018, Turkish Foreign Direct Investment (FDI) stock in the United States totaled $2.4 billion; roughly half the $4.7 billion the United States has invested in Turkey.
To map out the opportunities and to better understand the challenges of doing business in Turkey, American firms, both large and small, are encouraged 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.