Turkey’s economic performance remained positive in the first quarter of 2023 with GDP growth of 4% year on year (YoY). Both business and consumer confidence are on a positive trend. The economy has remained resilient despite the devastating earthquakes suffered in the south of the country in early February. In annual terms, fixed investment growth was 4.9% YoY driven primarily by capital expenditure on equipment, which has contributed to an increase in productivity.
In April, Turkey’s treasury successfully issued a $2.5 billion green bond, further pointing to the country’s ability to mobilize sustainable finance.
These trends are buoyed by The Harvard Growth Lab’s 2030 Projections, which forecast an annual growth rate of 4.3% over the next decade. This positions Turkey in the top growth quartile globally. Moreover, the Turkish government has embarked on a structural transformation process, with the aim of reallocating economic activity from low to high productivity sectors. The industrial machinery and electrical equipment sectors demonstrate particular promise, and could set the stage for further long-term economic growth.
The June appointment of Mehmet Simsek as Turkey’s new treasury and finance minister further suggests a move toward greater economic and macro-financial stability. “Transparency, consistency, predictability, and compliance with international norms will be our basic principles,” Simsek said on assuming his new role. Fiscal discipline and price stability are among his foremost priorities – both encouraging for markets and investments into the country.
Still, Turkey is left to confront significant challenges around governance – particularly with respect to the rule of law and human rights, as measured by the World Bank’s governance indicators. Robust institutions and democratic values remain important catalysts for economic development and should not be ignored. Rather, Turkey might consider prioritizing these factors alongside its renewed push for economic stability. In so doing, it might then pave the way for a smooth transition from its current upper-middle-income status to a high-income nation.
