2017 Index of Economic Freedom

Turkey

overall score65.2
world rank60
Rule of Law

Property Rights61.3

Government Integrity40.7

Judicial Effectiveness52.5

Government Size

Government Spending57.7

Tax Burden75.5

Fiscal Health95.7

Regulatory Efficiency

Business Freedom64.3

Labor Freedom48.5

Monetary Freedom72.2

Open Markets

Trade Freedom79.4

Investment Freedom75.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 77.7 million
  • GDP (PPP):
    • $1.6 trillion
    • 3.8% growth
    • 4.4% 5-year compound annual growth
    • $20,438 per capita
  • Unemployment:
    • 10.3%
  • Inflation (CPI):
    • 7.7%
  • FDI Inflow:
    • $16.5 billion
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Turkey’s economy has maintained overall macroeconomic stability despite ongoing political turmoil. Fiscal policy has been fairly prudent and has kept budget deficits and public debt under control, but inflationary pressures have increased. The financial sector remains stable and competitive.

However, prospects for economic growth in Turkey have been notably affected by political developments since the second half of 2016. Critical challenges include lack of transparency in government and erosion of the rule of law. The judicial system has become more susceptible to political influence.

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Background

Turkey is a constitutionally secular republic, but President Recep Tayyip Erdogan’s Justice and Development Party is pushing an Islamist agenda and eroding Turkey’s Euro–Atlantic relations by cracking down on freedom of speech and the media. Elections held in June 2015 resulted in a hung parliament, but snap elections in November 2015 gave Erdogan’s party a slim majority. An attempted military coup in July 2016 proved to be unsuccessful. During the subsequent state of emergency, Erdogan consolidated power by dismissing or arresting tens of thousands of public officials. Turkey has been a member of NATO since 1952. The European Union granted the country candidate status in 1999, but there is strong opposition from France, Germany, and Austria.

Rule of LawView Methodology

Property Rights 61.3 Create a Graph using this measurement

Government Integrity 40.7 Create a Graph using this measurement

Judicial Effectiveness 52.5 Create a Graph using this measurement

Property rights are generally enforced, although the courts are slow. The judiciary is independent but has shown that it can be swayed by the executive through appointments, promotions, and financing. That influence intensified after President Erdogan’s purges of the military, judiciary, and police in the wake of the failed July 2016 military coup. Corruption, cronyism, and nepotism in government and in daily life are growing concerns.

Government SizeView Methodology

The top personal 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. The overall tax burden equals 28.7 percent of total domestic income. Government spending has amounted to 37.6 percent of total output (GDP) over the past three years, and budget deficits have averaged 1.2 percent of GDP. Public debt is equivalent to 32.6 percent of GDP.

Regulatory EfficiencyView Methodology

Bureaucratic red tape and ineffective enforcement of regulations continue to be substantial drags on entrepreneurship. The rigidity of the labor market limits the emergence of a more dynamic economy. The statutory minimum wage was raised by approximately 30 percent in January 2016. The government sets prices for products provided by state-owned enterprises and controls prices for some agricultural products and electricity.

Open MarketsView Methodology

Trade is important to Turkey’s economy; the value of exports and imports taken together equals 59 percent of GDP. The average applied tariff rate is 2.8 percent. There is no general screening of or discrimination against foreign investment, and many state-owned enterprises have been privatized. The banking sector, which dominates the financial system, remains well capitalized and resilient. The presence of foreign banks is relatively small.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Switzerland81.50.5
2Estonia79.11.9
3Ireland76.7-0.6
4United Kingdom76.40.0
5Georgia763.4
6Luxembourg75.92.0
7The Netherlands75.81.2
8Lithuania75.80.6
9Denmark75.1-0.2
10Sweden74.92.9
11Latvia74.84.4
12Iceland74.41.1
13Finland741.4
14Norway743.2
15Germany73.8-0.6
16Czech Republic73.30.1
17Austria72.30.6
18Macedonia70.73.2
19Armenia70.33.3
20Romania69.74.1
21Poland68.3-1.0
22Kosovo67.96.5
23Bulgaria67.92.0
24Cyprus67.9-0.8
25Belgium67.8-0.6
26Malta67.71.0
27Hungary 65.8-0.2
28Slovakia65.7-0.9
29Turkey65.23.1
30Albania64.4-1.5
31Spain63.6-4.9
32France63.31.0
33Portugal62.6-2.5
34Italy62.51.3
35Montenegro62-2.9
36Bosnia and Herzegovina60.21.6
37Croatia59.40.3
38Slovenia59.2-1.4
39Serbia 58.9-3.2
40Belarus58.69.8
41Moldova580.6
42Russia57.16.5
43Greece551.8
44Ukraine48.11.3
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