2020 Index of Economic Freedom

Turkey

OVERALL SCORE64.4
WORLD RANK71
Rule of Law

Property Rights57.4

Judicial Effectiveness53.7

Government Integrity44.6

Government Size

Tax Burden76.7

Government Spending64.1

Fiscal Health86.1

Regulatory Efficiency

Business Freedom67.0

Labor Freedom49.2

Monetary Freedom66.1

Open Markets

Trade Freedom78.0

Investment Freedom70.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 82.0 million
  • GDP (PPP):
    • $2.3 trillion
    • 2.6% growth
    • 4.9% 5-year compound annual growth
    • $27,956 per capita
  • Unemployment:
    • 10.9%
  • Inflation (CPI):
    • 16.3%
  • FDI Inflow:
    • $12.9 billion

Turkey’s economic freedom score is 64.4, making its economy the 71st freest in the 2020 Index. Its overall score has decreased by 0.2 point due to a lower fiscal health score. Turkey is ranked 36th among 45 countries in the Europe region, and its overall score is well below the regional average and above the world average.

The Turkish economy has been moderately free for more than a decade. GDP growth had been robust until 2018, when a currency and debt crisis pushed the economy into recession.

The resilience of Turkey’s economy is due to solid public finances, well-capitalized banks, and a dynamic and diversified private sector. Moving into the mostly free ranks of economic freedom, however, will require reforms to make the labor market more competitive. More urgently, the government will have to strengthen judicial effectiveness and the fight against corruption, both of which were damaged in the aftermath of the crackdown that followed the attempted coup in 2016.

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Background

Turkey is a constitutionally secular republic, but President Recep Tayyip Erdogan’s Justice and Development Party (AKP) has pushed an Islamist agenda and eroded democracy. Erdogan further consolidated power after 2018 elections allowed an AKP coalition with the Nationalist Action Party to retain control of the unicameral national assembly while Erdogan eked out a slim victory for a second four-year term as president. Turkey’s largely free-market and diversified economy is driven by its industrial and service sectors, but traditional agriculture still accounts for about 25 percent of employment. Although the economy has shown resilience in the past, political instability has blocked needed reforms, and a 2018 currency crisis and recession have put severe pressure on the country.

Rule of LawView Methodology

Property Rights 57.4 Create a Graph using this measurement

Judicial Effectiveness 53.7 Create a Graph using this measurement

Government Integrity 44.6 Create a Graph using this measurement

Secured interests in property are recognized and enforced, and public record-keeping is reliable. Following the July 2016 coup attempt, the government confiscated over 1,100 companies. Judicial independence has been severely weakened since the coup attempt. Corruption, including money laundering, bribery, and collusion in the allocation of government contracts, remains a major problem even at the highest levels of government.

Government SizeView Methodology

The top personal income tax rate is 35 percent, and the top corporate tax rate is 22 percent. Other taxes include value-added and environment taxes. The overall tax burden equals 24.9 percent of total domestic income. Government spending has amounted to 34.6 percent of the country’s output (GDP) over the past three years, and budget deficits have averaged 2.8 percent of GDP. Public debt is equivalent to 29.1 percent of GDP.

Regulatory EfficiencyView Methodology

Government decision-making can be opaque, and arbitrary regulatory enforcement hampers businesses. Several business-friendly reforms were adopted in the past year, but transferring property became more costly. The workforce is relatively well educated, but the labor market remains rigid. Although Turkey had few price controls historically, the government tried to tamp down increases in food prices in 2019 by imposing price controls at the wholesale level.

Open MarketsView Methodology

The total value of exports and imports of goods and services equals 60.4 percent of GDP. The average applied tariff rate is 3.5 percent, and 335 nontariff measures are in force. Foreign investment is welcome, but restrictions remain in effect in a number of sectors. Investors face lingering bureaucracy in the regulatory environment. The financial system is evolving toward greater transparency and competitiveness.

Country's Score Over Time

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Regional Ranking

RANK COUNTRY OVERALL CHANGE
1Switzerland820.1
2Ireland80.90.4
3United Kingdom79.30.4
4Denmark78.31.6
5Estonia77.71.1
6Georgia77.11.2
7Iceland77.10.0
8Netherlands770.2
9Lithuania76.72.5
10Luxembourg75.8-0.1
11Finland75.70.8
12Sweden74.9-0.3
13Czech Republic74.81.1
14Germany73.50.0
15Norway73.40.4
16Austria73.31.3
17Latvia71.91.5
18Armenia70.62.9
19Bulgaria70.21.2
20Cyprus70.12.0
21Romania69.71.1
22North Macedonia69.5-1.6
23Malta69.50.9
24Azerbaijan69.33.9
25Poland69.11.3
26Belgium68.91.6
27Slovenia67.82.3
28Kosovo67.40.4
29Portugal671.7
30Albania66.90.4
31Spain66.91.2
32Slovakia66.81.8
33Hungary 66.41.4
34France662.2
35Serbia 662.1
36Turkey64.4-0.2
37Italy63.81.6
38Bosnia and Herzegovina62.60.7
39Croatia62.20.8
40Moldova622.9
41Belarus61.73.8
42Montenegro61.51.0
43Russia612.1
44Greece59.92.2
45Ukraine54.92.6
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