2013 Index of Economic Freedom

Turkey

overall score62.9
world rank69
Rule of Law

Property Rights50.0

Freedom From Corruption42.0

Limited Government

Government Spending64.9

Fiscal Freedom77.0

Regulatory Efficiency

Business Freedom68.2

Labor Freedom43.1

Monetary Freedom73.3

Open Markets

Trade Freedom85.2

Investment Freedom65.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 74.0 million
  • GDP (PPP):
    • $1.1 trillion
    • 8.5% growth
    • 3.5% 5-year compound annual growth
    • $14,517 per capita
  • Unemployment:
    • 11.7%
  • Inflation (CPI):
    • 6.5%
  • FDI Inflow:
    • $15.9 billion
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Turkey’s economic freedom score is 62.9, making its economy the 69th freest in the 2013 Index. Its score is 0.4 point better than last year, reflecting gains in the management of public spending, business freedom, and labor freedom that outweigh declines in investment freedom and freedom from corruption. Turkey is ranked 32nd out of 43 countries in the Europe region, and its overall score is higher than the world average.

Turkey emerged from the global economic downturn largely unscathed and continues its transition to a more flexible and open economy. Performance is relatively good in many areas of economic freedom, and GDP has tripled since 2002. Trade has been a strong driver of economic growth, and the financial sector has gained competitiveness. Privatizations continue, albeit slowly, and the government has pursued reforms to encourage entrepreneurial activity and eliminate regulatory inefficiencies.

Despite overall progress, institutional weaknesses continue to hold back economic freedom and prevent more dynamic growth. In particular, the foundations of economic freedom are vulnerable to corruption and an inefficient judicial system that is subject to political interference.

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Background

Turkey, a constitutionally secular state often viewed as a bridge between East and West, has developed into a successful multi-party democracy, although there are worries that Prime Minister Recep Tayyip Erdogan’s Justice and Development Party (AKP) is pushing an Islamist agenda and eroding Turkey’s Euro–Atlantic connections. Economic modernization is progressing despite clashes with the media and the slow pace of judicial reform. The European Union formally granted Turkey candidate status in 1999, but strong opposition from France, Germany, and Austria makes final accession any time soon unlikely. Turkey’s dispute with Cyprus, which held the presidency of the EU Council during the second half of 2012, has also strained relations with the EU and delayed negotiations. Principal exports include foodstuffs, textiles, clothing, iron, and steel.

Rule of LawView Methodology

Property Rights 50.0 Create a Graph using this measurement

Freedom From Corruption 42.0 Create a Graph using this measurement

Property rights are generally enforced, but the courts are overburdened and slow, and judges are not well trained for commercial cases. The judiciary is subject to government influence. The intellectual property rights regime has improved, but infringement remains high with sophisticated counterfeiting of trademarked items. Bribery is outlawed, but corruption continues to undermine perceptions of government integrity.

Limited GovernmentView Methodology

The top income tax rate is 35 percent, and the top corporate tax rate is 20 percent. Other taxes include a value-added tax (VAT) and an environment tax. The overall tax burden equals 26 percent of total domestic income, and government spending has moderated to a level equivalent to 34.2 percent of GDP. The budget deficit has been declining, and public debt has dropped to 39.4 percent of GDP, prompting an upgrade by some investment agencies.

Regulatory EfficiencyView Methodology

The process for registering and setting up private enterprises has become less time-consuming, but bureaucratic red tape and ineffective enforcement of regulations continue to hinder entrepreneurship. Completing licensing requirements still costs about twice the level of average annual income. Despite reform efforts, the labor market lacks dynamism due to lingering rigidities. A large informal sector persists. Monetary stability remains weak.

Open MarketsView Methodology

The trade-weighted average tariff rate is relatively low at 2.4 percent, but non-tariff barriers constrain trade freedom. Foreign investment is officially welcome, although restrictions remain in a number of sectors. All investors face excessive bureaucracy and frequent changes in the legal and regulatory environment. The financial system has undergone a rapid transformation, with greater transparency and competitiveness.

Country's Score Over Time

Bar Graph of Turkey Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Turkey to other economic country groups

Regional Ranking

rank country overall change
1Switzerland81-0.1
2Denmark76.1-0.1
3Ireland75.7-1.2
4Estonia75.32.1
5United Kingdom74.80.7
6Luxembourg74.2-0.3
7Finland741.7
8The Netherlands73.50.2
9Sweden72.91.2
10Germany72.81.8
11Georgia72.22.8
12Lithuania72.10.6
13Iceland72.11.2
14Austria71.81.5
15Czech Republic70.91.0
16Norway70.51.7
17Armenia69.40.6
18Belgium69.20.2
19Cyprus69-2.8
20Slovakia68.71.7
21Macedonia68.2-0.3
22Spain68-1.1
23Malta67.50.5
24Hungary 67.30.2
25Latvia66.51.3
26Poland661.8
27Albania65.20.1
28Romania65.10.7
29Bulgaria650.3
30France64.10.9
31Portugal63.10.1
32Turkey62.90.4
33Montenegro62.60.1
34Slovenia61.7-1.2
35Croatia61.30.4
36Italy60.61.8
37Serbia 58.60.6
38Bosnia and Herzegovina57.30.0
39Moldova55.51.1
40Greece55.40.0
41Russia51.10.6
42Belarus48-1.0
43Ukraine46.30.2
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