2015 Index of Economic Freedom

Turkey

overall score63.2
world rank70
Rule of Law

Property Rights45.0

Freedom From Corruption50.0

Limited Government

Government Spending57.6

Fiscal Freedom76.1

Regulatory Efficiency

Business Freedom61.0

Labor Freedom50.2

Monetary Freedom72.4

Open Markets

Trade Freedom84.6

Investment Freedom75.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 76.5 million
  • GDP (PPP):
    • $1.2 trillion
    • 4.3% growth
    • 3.8% 5-year compound annual growth
    • $15,353 per capita
  • Unemployment:
    • 9.9%
  • Inflation (CPI):
    • 7.5%
  • FDI Inflow:
    • $12.9 billion
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Turkey’s economic freedom score is 63.2, making its economy the 70th freest in the 2015 Index. Its score has decreased by 1.7 points since last year, with declines in five of the 10 economic freedoms, including labor freedom, business freedom, the control of government spending, and property rights, outweighing improvements in freedom from corruption and investment freedom. Turkey is ranked 32nd out of 43 countries in the Europe region, and its overall score is higher than the world average.

Turkey’s economic freedom score has declined by 1.0 point since 2011. A 26-point decline in the management of government spending has offset a double-digit gain in financial freedom. Scores for five other economic freedoms, including business freedom and property rights, have also dropped.

Turkey’s commitment to economic freedom is vital given its position as an important emerging market. Its economic freedom rests on relatively stable but fragile foundations. The judiciary is subject to government influence, and corruption charges have reached high-level officials close to the government. While the economy is open and boasts a burgeoning manufacturing sector, regulatory inefficiencies and a rigid labor market hinder business formation and full employment, undermining more vibrant private-sector growth.

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Background

Turkey is a constitutionally secular republic, but Prime Minister Recep Tayyip Erdogan’s Justice and Development Party is pushing an Islamist agenda and eroding Turkey’s Euro–Atlantic connections. Large-scale protests resulting from unpopular government decisions continued sporadically in 2014. Economic modernization is progressing despite clashes with the media and the slow pace of judicial reform. Turkey has been a member of NATO since 1952. The European Union granted Turkey candidate status in 1999, but there is strong opposition from France, Germany, and Austria. Turkey’s dispute with Cyprus has also delayed negotiations. Turkey’s economy has been growing steadily for the past decade and weathered the 2008 global financial crisis relatively well. Principal exports include foodstuffs, textiles, clothing, iron, and steel.

Rule of LawView Methodology

Property Rights 45.0 Create a Graph using this measurement

Freedom From Corruption 50.0 Create a Graph using this measurement

Corruption, cronyism, and nepotism persist in government and daily life. An October 2013 report noted weaknesses related to transparency, with government ministries refusing to hand over information to the Court of Accounts and pressuring the court to alter its reports on corruption. The judiciary is only nominally independent. Property rights are generally enforced, but the courts are slow.

Limited GovernmentView Methodology

The top individual income tax rate is 35 percent, and the top corporate tax rate is 20 percent. Other taxes include a value-added tax and an environment tax. Tax revenues account for approximately 27.7 percent of the domestic economy. Government expenditures equal 37.6 percent of domestic production, and public debt is equivalent to 36 percent of gross domestic product.

Regulatory EfficiencyView Methodology

The regulatory framework remains cumbersome. There is a minimum capital requirement for incorporating a business, and licensing requirements consume over five months on average. The labor market lacks flexibility and hinders dynamic job growth. The state introduced a subsidy program intended to nearly double agricultural crop production by 2023 and maintains subsidies for fuel, electricity, and health care.

Open MarketsView Methodology

Turkey’s average tariff rate is 2.7 percent. Government procurement may favor domestic firms. Turkey, while generally very open to foreign investment, restricts investment in some sectors. The evolving financial sector remains dominated by the concentrated banking sector, in which the 10 largest banks account for over 80 percent of total lending. The number of nonperforming loans has increased.

Country's Score Over Time

Bar Graph of Turkey Economic Freedom Scores Over a Time Period

Country Comparisons

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Regional Ranking

rank country overall change
1Switzerland80.5-1.1
2Estonia76.80.9
3Ireland76.60.4
4Denmark76.30.2
5United Kingdom75.80.9
6Lithuania74.71.7
7Germany73.80.4
8The Netherlands73.7-0.5
9Finland73.40.0
10Luxembourg73.2-1.0
11Georgia730.4
12Sweden72.7-0.4
13Czech Republic72.50.3
14Iceland72-0.4
15Norway71.80.9
16Austria71.2-1.2
17Latvia69.71.0
18Belgium68.8-1.1
19Poland68.61.6
20Cyprus67.90.3
21Spain67.60.4
22Slovakia67.20.8
23Armenia67.1-1.8
24Macedonia67.1-1.5
25Hungary 66.8-0.2
26Bulgaria66.81.1
27Romania66.61.1
28Malta66.50.1
29Albania65.7-1.2
30Portugal65.31.8
31Montenegro64.71.1
32Turkey63.2-1.7
33France62.5-1.0
34Italy61.70.8
35Croatia61.51.1
36Slovenia60.3-2.4
37Serbia 600.6
38Bosnia and Herzegovina590.6
39Moldova57.50.2
40Greece54-1.7
41Russia52.10.2
42Belarus49.8-0.3
43Ukraine46.9-2.4
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