2018 Index of Economic Freedom

Turkey

overall score65.4
world rank58
Rule of Law

Property Rights54.7

Government Integrity42.0

Judicial Effectiveness54.5

Government Size

Government Spending68.1

Tax Burden74.7

Fiscal Health93.6

Regulatory Efficiency

Business Freedom63.3

Labor Freedom47.6

Monetary Freedom72.3

Open Markets

Trade Freedom78.6

Investment Freedom75.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 79.8 million
  • GDP (PPP):
    • $2.0 trillion
    • 3.8% growth
    • 5.5% 5-year compound annual growth
    • $24,912 per capita
  • Unemployment:
    • 10.3%
  • Inflation (CPI):
    • 7.8%
  • FDI Inflow:
    • $12.0 billion
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Turkey’s economic freedom score is 65.4, making its economy the 58th freest in the 2018 Index. Its overall score has increased by 0.2 point, with a significant improvement in the score for the government spending indicator offsetting declines in property rights, fiscal health, and business freedom. Turkey is ranked 28th among 44 countries in the Europe region, and its overall score is below the regional average but above the world average.

During earlier periods of political instability, Turkey’s economy maintained resilience thanks to the country’s solid public finances, well-capitalized and well-regulated banking sector, and vigorous, diversified private business sector. The intensification of political instability in the current crisis could have a negative impact on foreign capital inflows. Critical challenges include lack of transparency in government and erosion of the rule of law. The judicial system has been severely disrupted and has become much more susceptible to political influence.

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Background

Modern Turkey, a constitutionally secular republic, prospered after adopting Western reforms but has alternated between democracy and authoritarian or military rule. The Islamist agenda of President Recep Tayyip Erdogan’s Justice and Development Party has eroded ties with the West. After a failed military coup in 2016, Erdogan used a state of emergency to consolidate power. A narrowly approved April 2017 referendum replaced the parliamentary system with a presidential system. The industrial and service sectors drive Turkey’s largely free-market economy, but agriculture accounts for about 25 percent of employment. Domestic uncertainty, populist spending measures, government interventionism, and security concerns generate financial market volatility and threaten Turkey’s economic outlook.

Rule of LawView Methodology

Property Rights 54.7 Create a Graph using this measurement

Government Integrity 42.0 Create a Graph using this measurement

Judicial Effectiveness 54.5 Create a Graph using this measurement

Secured interests in property are recognized, recorded, and enforced. More than one-quarter of the country’s judges and prosecutors have been dismissed by presidential decree since mid-2016 for alleged links to the opposition Gulenist party, and most of them have been jailed. Corruption, including money laundering, bribery, and collusion in the allocation of government contracts, remains a major problem.

Government SizeView Methodology

The top personal income tax rate is 35 percent, and the top corporate tax rate is 20 percent. Other taxes include value-added and environment taxes. The overall tax burden equals 30.0 percent of total domestic income. Over the past three years, government spending has amounted to 32.6 percent of total output (GDP), and budget deficits have averaged 1.7 percent of GDP. Public debt is equivalent to 29.1 percent of GDP.

Regulatory EfficiencyView Methodology

In 2016, Turkey reduced the time needed to register a company. Political uncertainty and security concerns cast a shadow over the business environment. Despite the government’s attempts to address the issue, child labor remains a problem, particularly in the seasonal agricultural sector. Turkey has few price controls, but 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 moderately important to Turkey’s economy; the combined value of exports and imports equals 47 percent of GDP. The average applied tariff rate is 3.2 percent. Nontariff barriers impede trade. In general, government policies do not significantly interfere with foreign investment, but investors do face bureaucracy and changes in the legal and regulatory environment. Financial-system reforms have enhanced transparency and competitiveness.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Switzerland81.70.2
2Ireland80.43.7
3Estonia78.8-0.3
4United Kingdom781.6
5Iceland772.6
6Denmark76.61.5
7Luxembourg76.40.5
8Sweden76.31.4
9Georgia76.20.2
10Netherlands76.20.4
11Lithuania75.3-0.5
12Norway74.30.3
13Czech Republic74.20.9
14Germany74.20.4
15Finland74.10.1
16Latvia73.6-1.2
17Austria71.8-0.5
18Macedonia71.30.6
19Romania69.4-0.3
20Armenia68.7-1.6
21Poland68.50.2
22Malta68.50.8
23Bulgaria68.30.4
24Cyprus67.8-0.1
25Belgium67.5-0.3
26Hungary 66.70.9
27Kosovo66.6-1.3
28Turkey65.40.2
29Slovakia65.3-0.4
30Spain65.11.5
31Slovenia64.85.6
32Albania64.50.1
33Montenegro64.32.3
34France63.90.6
35Portugal63.40.8
36Italy62.50.0
37Serbia 62.53.6
38Bosnia and Herzegovina61.41.2
39Croatia611.6
40Moldova58.40.4
41Russia58.21.1
42Belarus58.1-0.5
43Greece57.32.3
44Ukraine51.93.8
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