Country Profile- Turkey
Turkey’s largely free-market economy is driven by its industry and, increasingly, service sectors, although its traditional agriculture sector still accounts for about 25% of employment. The automotive, petrochemical, and electronics industries have risen in importance and surpassed the traditional textiles and clothing sectors within Turkey’s export mix. However, the recent period of political stability and economic dynamism has given way to domestic uncertainty and security concerns, which are generating financial market volatility and weighing on Turkey’s economic outlook.
Turkey remains highly dependent on imported oil and gas but is pursuing energy relationships with a broader set of international partners and taking steps to increase use of domestic energy sources including renewables, nuclear, and coal.
After Turkey experienced a severe financial crisis in 2001, Ankara adopted financial and fiscal reforms as part of an IMF program. The reforms strengthened the country’s economic fundamentals and ushered in an era of strong growth averaging more than 6% annually until 2008. An aggressive privatization program also reduced state involvement in basic industry, banking, transport, power generation, and communication. Global economic conditions and tighter fiscal policy caused GDP to contract in 2009, but Turkey’s well-regulated financial markets and banking system helped the country weather the global financial crisis, and GDP growth rebounded to around 9% in 2010 and 2011, as exports and investment recovered following the crisis.
Turkey’s performance since 2000 has been impressive. Macroeconomic and fiscal stability were at the heart of its performance, enabling increased employment and incomes and making Turkey an upper-middle-income country. Poverty incidence more than halved over 2002-15, and extreme poverty fell even faster. During this time, Turkey urbanized dramatically, opened to foreign trade and finance, harmonized many laws and regulations with European Union (EU) standards, and greatly expanded access to public services.
Although Turkey’s growth prospects are reasonably robust, with an expected 4.7% growth rate for 2018 and the medium term, it faces challenges to moving into high-income status. Turkey’s macroeconomic achievements are also being tested by an uncertain outlook. Domestic challenges and a deteriorating geopolitical environment have negatively impacted exports, investment, and growth.
The Government will need to take strong measures to revitalize private investment, boost growth, and resume Turkey’s convergence with Europe. Most notably, new momentum is needed to improve the quality of education and boost productivity through greater innovation.
Turkey exported US $157.1 billion worth of goods around the world in 2017. This figure represents roughly 0.9% of the overall global exports, estimated at US $17.5 trillion last year.
The country was the 20th largest importer last year, importing a total of US $233.8 billion (1.3% of the total world imports) worth of products.
The top trading partner of Turkey was Germany, followed by United Kingdom and United Arab Emirates. India ranks 43rd in the list of Turkey’s largest trading partner in 2017, with a trade surplus of US $5.5 billion due to huge import by Turkey.
TURKEY’S MERCHANDISE TRADE WITH WORLD
Turkey’s exports from the world have followed its path of imports as can be seen in the graph below. The country has maintained a trade deficit throughout the past decade. In 2017 it had a trade deficit of US $76.7 billion, witnessing the highest deficit in 2011 of more than US $105.9 billion.
INDIA-TURKEY MERCHANDISE TRADE
India’s import from Turkey has witnessed a continuing decline in the past decade. It lies well below its exports to the country, thus enjoying huge trade surplus with Turkey. India recorded highest trade surplus with Turkey in 2014 of more than US $4.2 billion.
TURKEY’S EXPORTS TO THE WORLD
Turkey’s total export in 2017 amounted to US $157.1 billion. Its top export product at HS-6 digit level last year was Gold with a share of 4.2% in its export basket. This was followed by motor vehicles, articles of jewelry, motor cars, bars & rods and light oils & preparations of petroleum.
TURKEY’S IMPORTS FROM THE WORLD
Turkey’s import basket continued to be dominated by gold (US $16.6 billion) and Medium oils and preparations, of petroleum (US $9 Billion), which together accounted for 10.9% of its total imports (US $233.8 Billion) at HS-6 digit level. Turkey’s increasing dependence on imports is visible with its rising trade deficit.
INDIA’S EXPORTS TO TURKEY
India’s total exports to Turkey were US $6.2 billion in 2017. Its top three exports at HS-6 digit level were medium oils & preparations (US $1.2 billion), textured filament yarn of polyester (US $184.6 million) and parts & accessories, for tractors & motor vehicles (US $181.7 million).
INDIA’S IMPORTS FROM TURKEY
India’s total imports from Turkey in 2017 were US $758.6 million, leading India to have a huge trade surplus with Turkey. India’s import was dominated by gold (US $101.5 million) and marble (US $93.4 million).
There are historical connections between India and Turkey. The mechanism of the Turkey-India Joint Economic and Technical Cooperation Committee (JEC) was established by the Economic and Technical Cooperation Agreement signed in 1978 and so far, 10 JEC Meetings have been realized between the two countries. The last JEC meeting (10th) between Turkey and India was held in New Delhi, on 30-31 January 2014. Joint Committee Meetings are also held in the fields of agriculture and tourism between the two countries.
The Agreement on the Avoidance of Double Taxation (1996) and the Agreement on Encouragement and Protection of Investments (1998) were also signed between the two countries. There is no the FTA agreement between Turkey and India. However, India has the opportunity to benefit from discounted tariffs on certain products for export to Turkey by making use of the Generalized Preferences System (GSP) applied by the EU.
India-Turkey economic and commercial cooperation constitutes an important dimension of the bilateral relationship between the two nations, which have been strengthened by the exchange of visits of leaders of both countries in recent times. There is huge trade potential for both the countries in existing product basket as well as potential products which are not yet traded between them. The two nations have to build their trade relation, which is frozen in time, to explore better trade opportunities which are yet to be exploited.