Fiscal discipline, sound monetary policy, and a reform agenda continue to be the main pillars of Turkey’s economic program. These policies brought about a period of strong growth, price stability, and balanced budgets, all of which ensured a transformation in the economy.
In addition to its sound macroeconomic policies, Turkey has implemented a comprehensive and far-reaching structural reform agenda. Compared with the experiences of other countries, Turkey’s success has been remarkable due in no small part to the speed in which it has carried out structural and institutional changes. Indeed, Turkey has made great progress in restructuring its financial sector, as well as in improving both public sector governance and its business environment.
The structural reforms that have been implemented aim to:
- increase the role of the private sector in the Turkish economy
- enhance the efficiency and resiliency of the finance sector
- place the social security system on a more sound footing
These reforms have strengthened the macroeconomic fundamentals of the Turkish economy. At the same time, Turkey keeps a close eye on global and domestic developments and adjusts its business environment accordingly. In this regard, the “Priority Transformation Program” was announced by the government to achieve the following aims:
- Qualified people, strong society
- Innovative production, sustainable growth
- Livable places, sustainable environment
- International cooperation for development
Sound economic policies combined with dynamic economic reforms have yielded favorable results for Turkey’s economy, not the least of which has been sustained robust economic growth over the last decade. The structural reforms and successful macroeconomic policies have led Turkey to become one of the fastest-growing economies in its region.
Between 2005 and 2015:
- GDP increased by 45 percent, reaching USD 720 billion in nominal terms
- Annual average real GDP growth of 3.8 percent
- Public debt stock decreased from 60 percent of GDP to 33 percent of GDP
- Budget deficit decreased from 10 percent of GDP to 0.1 percent of GDP
In the past ten years, the Turkish economy has been one of the fastest-growing emerging economies.
Source: IMF World Economic Outlook April 2016, TurkStat
While the Turkish economy has been growing steadily, living standards have increased significantly. GDP per capita increased from the level of USD 4,565 in 2003 to USD 9,261 in 2015. GDP based on purchasing-power-parity (PPP) per capita GDP also doubled during the period of 2003-2015.
GDP per Capita – based on PPP (USD)
Source: IMF World Economic Outlook April 2016
Prudent Fiscal Policy
Fiscal discipline continues to be the cornerstone of the macroeconomic performance of the Turkish economy. Turkey’s central government ran almost no budget deficit in 2015.
Thanks to this prudent fiscal policy, Turkey has reduced its debt stocks and become one of the best performers among the European economies in reducing government debt. The general government debt stock ratio has been meeting the EU Maastricht Criteria, 60%, since 2004.
Source: Undersecretariat of the Treasury, 2016
Source: Undersecretariat of the Treasury and Eurostat, 2016
General Government Budget Balance (% of GDP)
Source: European Commission’s Directorate-General for Economic and Financial Affairs (ECFIN) and Eurostat, Ministry of Finance, 2016