Tapping potential to the fullest

Turkey has the ambitious vision to rank among the 10 largest economies in the world by 2023, the year when it will celebrate the centenary of its foundation as a Republic. To reach this goal, active long-term economic plans and strategies have been put in

Turkey is ranked 17th of the largest economies in the world. However, it has set the goal of becoming one of the 10 largest economies in the world by 2023, and doing so will require the country to get 1,5 % share from global trade and make significant upgrades to its energy, information technology, finance and physical infrastructures.

Turkey’s government has emphasized it is prepared to undertake notable economic reforms to meet these growth targets – notwithstanding short and medium-term economic volatilities. The government has set the course in various sectors to sustainably strengthen the economy based on the experience that Turkey’s growth has proven remarkably resilient, even in the face of a challenging global economic environment in the recent past. Action is being taken to raise productivity and advance the shift to a balanced, sustainable and strong growth path that seeks to boost living standards for the entire population. Looking back, Turkey has been successful in significantly changing the proportion of urban to rural population over the past decade in its industrialization drive. Today, 75 per cent of the population lives in urban centres and supports a strong industrial, manufacturing-based economy that has clearly broadened beyond the traditional industrial hubs of Istanbul, Ankara and Izmir to encompass a number of other Anatolian cities, several of which have developed into economic powerhouses and strong export contributors. But this has also helped in reducing the import of numerous goods that now are produced by domestic firms in Turkey without a significant impact on prices. This development conveys confidence to both foreign and local investors who perceive Turkey as a country with sound public finances, a strong financial sector and brisk domestic demand, as well as liberalized and well-regulated markets. It also enables Turkey to reach constant high production levels and creates an appropriate environment for a high and stable long-term growth.

The government’s main strategy for this growth trajectory is the development of the private sector towards an open and competitive driver for the economy. Increasing productivity and accelerating the industrialization process are important milestones of this approach. Another step is the strengthening of the industrial sector and its productivity growth. This will include the reallocation of resources to productive areas and implement monetary, fiscal and incentive policies for them. It will be accompanied by macroeconomic stability measures, namely fiscal, monetary and balance of payments policies, improvement of human capital development, an increase in the effectiveness of the labour market, technology development and the increase of innovative capacity, as well as the strengthening of physical infrastructure and institutional quality. To boost growth further, Turkey also puts a focus on fiscal discipline. Plans are to avoid a rise in public expenditure and gain fiscal space by increasing government revenues through the expansion of the tax base, the strengthening of price stability and by resolving the current account deficit problem.

In addition, the government plans to continue funding the budget via new privatization schemes and by refraining from overall tax reductions. It will maintain incentives for domestic industries – including small and medium-sized enterprises and startups – and foreign investors via preferential treatment in tenders and tax reliefs, especially in the healthcare, chemicals and IT sectors and other high-skilled, value-adding segments of the economy. To further improve fiscal health, sights have also been set on the private savings rate, which should be increased from 15 per cent to the OECD level of around 20 per cent or higher. Overall, by ensuring a level playing field for businesses of all sizes, improving the quality of human capital and integrating the country into the global value chain, Turkey is tapping its potential to the fullest and remains on track to reach its ambitious goal for 2023.