Economic studies


Population 83.2 million
GDP per capita 9,151 US$
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major macro economic indicators

  2018 2019 2020 (e) 2021 (f)
GDP growth (%) 3.0 0.9 0.5 4.0
Inflation (yearly average, %) 16.3 15.2 12.6 12.0
Budget balance (% GDP) -2.0 -2.9 -4.9 -3.1
Current account balance (% GDP) -2.7 1.2 -4.7 -0.9
Public debt (% GDP) 30.2 32.5 41.7 45.5

(e): Estimate (f): Forecast


  • Young and educated workforce
  • Well developed and flexible manufacturing tissue
  • Strategic geopolitical location
  • Strong economic recovery after COVID-19
  • Recovering export performance that reduces current account risks


  • Large dependence on external financing
  • Import-dependent structure of the manufacturing sector
  • High inflationary pressures resulting from the lira’s weakness
  • Weakened central bank reserves, higher public debt
  • Increased regional and geopolitical tensions


Resilient post-pandemic growth, persisting financing challenges

The Turkish economy recovered by a stronger-than-expected 6.7% year-on-year (YoY) in the third quarter of 2020 after contracting by nearly 10% YoY in the second quarter, as anti-COVID-19 measures hit the economy. The growth was fuelled by large and cheap credit expansion (50% YoY in June), fiscal stimulus (12.8% of GDP in 2020) and recovering external demand thanks to the easing of the lockdown measures. However, the loose monetary and accommodative fiscal policies resulted in a widening of both public and external deficits, as well as a surge in inflation (14% YoY in November 2020 compared to the official target of 5%). Although the central bank adopted a more conventional monetary policy in November by hiking its policy rate by 475 basis points to support the ailing lira, the cumulative depreciation of the latter (around 30% versus USD in 2020) will continue to create an obstacle for reducing inflation. An increase in oil prices on the global markets would add to inflationary pressures, as the Turkish economy remains dependent on energy imports despite the recent gas drilling efforts in the Black Sea and East Mediterranean. Tighter financial conditions and reduced consumer confidence due to high inflation will weigh on household consumption (60% of GDP) growth in 2021. Furthermore, higher interest rates and imported inputs costs will weigh on investments. Conversely, the fiscal stimulus is expected to remain for some time in order to support households and businesses. Nevertheless, a renewed increase in COVID-19 cases in the last quarter of 2020 slowed the recovery in retail and of the economy. Therefore, the developments regarding the vaccine will be important, as it will both affect domestic and external demand.


Lower current account and fiscal deficits after COVID-19

In January-October 2020, the current account recorded a deficit of USD 31 billion, compared to a surplus of USD 9.6 billion in 2019. The deficit is expected to narrow in 2021 on the back of a recovery in tourism revenues (nearly USD 26 billion in 2019, around 3.5% of GDP), which will depend on the vaccine-related developments. Additionally, higher exports in 2021, due to the global economic recovery, and slower gold imports (requested by households as a traditional self-protection instrument against inflation), will also contribute to this narrowing. Moreover, the strong depreciation of the lira and subdued internal demand will soften imports overall. Regarding the financing, foreign direct investments (which stood at USD 3 billion in January-October 2020, i.e. below 1% of GDP) and portfolio investments (net outflow of USD 12 billion in January-October 2020) will remain weak due to the higher risk aversion of international investors versus Turkish assets. Depleted reserves, high inflation, lira volatility and sudden changes in regulations represent key challenges for the Turkish economy. The central bank’s gross international reserves (excluding gold) fell to USD 44 billion as of November 2020 compared to USD 78 billion at the beginning of 2020. Excluding banks’ required reserves, net foreign exchange reserves are negative. Moreover, the swap-reliance increased during 2020, as the net short position increased from USD 18.2 billion in end-2019 to USD 61.3 billion as of October 2020. Turkey’s short-term external debt rose to USD 124 billion (nearly 20% of GDP) as of the second quarter of 2020, with 62% owed by companies and banks. Falling reserves and a high level of external debt increase Turkey’s risk premium and borrowing costs. However, the new economic team has returned to policies that are more conventional and the authorities have repeatedly underlined their willingness to implement reforms targeting the improvement of the business environment. Low level of public debt (almost evenly split between domestic and external creditors) gives the government the comfort to maintain the fiscal stimulus during 2021. However, increased interest payments, guarantees provided under the public private partnership projects and reduced level of tax collection due to slower growth under COVID-19 will weigh on fiscal performance.


Rising geopolitical tensions amid stretched relations with the EU and the U.S

The geopolitical priorities of Turkey and some of its Western allies have started to diverge in the last few years. Turkey’s active policy in its region seems likely to persist in the upcoming period, in line with the country’s national geopolitical stance. Consequently, relations between some European countries and Turkey may remain strained. However, their close economic ties and their willingness to increase trade volumes and reduce their supply chain risks after COVID-19 represent a potential of improvement to their relations. On the other hand, relations with the U.S. under the new president Joe Biden will have to be monitored closely, particularly in terms of sanctions over the S400 missile system.


Last updated: February 2021


Traditional credit payment instruments are still in common use in Turkey’s domestic market, as they often serve as negotiable instruments. This is the case for promissory notes, a solution regularly used by SMEs for commercial transactions. Similarly, post-dated cheques serve as both a title of payment and a credit instrument. Cheques circulate in the domestic market as negotiable instruments until their maturity date. An amendment, which came into effect on the July 15, 2016, imposes a punitive fine on the person responsible for a “dishonoured cheque”. If the fine is not paid, the punitive measure can be transformed into a prison sentence of up to 1,500 days. In such cases, neither settlement nor prepayment are executed. In addition, the drawer of a dishonoured cheque is subsequently banned from drawing cheques or opening cheque accounts. After payment of cheque amount or ten years of the court decision, a ban shall be removed. Although banks are now required to exercise greater vigilance with regard to the profiles of their clients, the law concerning cheques, which came into force in December 2009 provides for large financial sanctions, which are payable by the drawer of the cheque in cases of non-payment.

The SWIFT electronic network is well-established in Turkish banking circles and constitutes the most commonly used instrument for international payments. 

Debt Collection

Amicable phase

Amicable procedures, which involve the sending of a formal notice to pay, followed by repeated telephone calls, remain a relatively effective method. On-site visits can also pave the way for restoring communications between suppliers and customers, thereby enhancing the chances of completing successful negotiations. The civil procedure code specifically states that the judge may at any time during legal action encourage the amicable settlement of the dispute, provided that it results from a real desire by the parties to seek an out-of-court settlement via a negotiated transaction.

The Law on Mediation in Civil Disputes stipulates that mediation shall be applied only in the resolution of private law conflicts arising from acts or transactions of interested parties who have the capacity to settle such conflicts. The parties are free to apply to a mediator at any time, in order to continue, finalise or abandon the process.

Depending on the debtor’s solvency, the terms of the transaction can range from payment in full, to repayment by instalments, to a partial payment as final settlement. In the absence of a voluntary settlement, the threat of a bankruptcy petition (iflâs) is a frequently employed tactic to elicit a response from the debtor and prompt them to pay the arrears.


legal proceedings
Debt execution procedure – via an Administrative Body

 Negotiable instruments, such as bills of exchange, promissory notes and cheques, enable creditors (without obtaining a prior ruling) to directly approach the enforcement office (Icra Dairesi) for serving the debtor with an injunction to pay. They can then, if necessary, proceed with the seizure of the debtor’s assets. Seizure is a process that begins with filling an order for payment, which is then served to the debtor. If there are no objections to the order, the assets of the debtor are liquidated to cover the claims. If the order is not accepted by the debtor, he has the possibility to request that the creditor proves the claim in court. The debtor has ten days to settle the arrears in question, or five days to approach the enforcement court and oppose payment on grounds that, for example, the signature on the document is not his own, or that the debt no longer exists.

If the creditor decides to serve the debtor with an injunction to pay despite the fact that it does not hold negotiable instruments, such as bills of exchange, promissory notes and cheques, the debtor can object to the injunction to pay in 7 days after receiving it. This objection suspends the enforcement proceedings until the creditor files and wins an action for annulment of objection suit regarding its claim. With the regulation that came into force on 1.1.2019 applying to the mediator became a precondition for the cases that are filed against the claims for the payment of a certain amount of money and compensation. Therefore, in order for the creditor to file the action for annulment of objection suit to resume the execution process it first has to apply to the mediator.

If the opposition is deemed to be abusive, the debtor is liable to large penalties.


Litigation procedure – examined by the Court

If the pre-legal procedures for the collection of the debt from the partner/supplier fail, a lawsuit can be brought against the debtor before commercial courts. The commercial court (asliye ticaret mahkemeleri), which is a specialised chamber of the court of first instance, is competent to hear commercial disputes and insolvency proceedings. In cases where the validity of the claim is disputed, the only recourse is to initiate ordinary proceedings, via a summons, to appear in court.

If Turkey has not signed a bilateral treaty or a reciprocity treaty with the plaintiff’s country, the plaintiff is required to put up a surety bond, judicatum solvi, with the competent local court. This amount represents approximately 15% of the claim. The same pertains to Turkish applicants with no permanent residence in Turkey. At the end of the litigation procedure, the security deposit is refunded to the creditor by the court.

The plaintiff is also obliged to put up one quarter of the court fees, which are proportional to the amount of the claim, at the commencement of the proceedings. In addition, notarised documents must be presented to the court.

Ordinary proceedings are organised into three phases. The first involves position statements from each party (a statement of claim and a statement of defence). In the second and lengthier phase, the court investigates the case and examines the relevance of the evidence submitted, to see whether it is conclusive or discretionary evidence. Finally, in the main hearing that constitutes the third phase, the court hears both parties and their lawyers before issuing a ruling.

Enforcement of a Legal Decision

Any legal decision can be fulfilled via enforcement and bankruptcy offices/officers, if the person who is ruled against, does not performs legal decision voluntarily on time. Enforcement differs slightly depending on the type of debt, but it generally resembles the Debt Execution Procedure. However, in contrast with the Debt Execution Procedure, the objection to the enforcement of a legal decision is an exceptional situation.

Insolvency Proceedings


The debtor subject to bankruptcy can apply for a proposal of composition agreement (konkordato projesi). If the proposal appears to the commercial court to be viable, the court imposes a moratorium and appoints a composition commissioner (konkordato komiseri) to examine the debtor’s affairs. The most common form of proposal is for a total or partial repayment over a period of time. However, a proposal may also take the form of an assignment of all or part of the debtor’s assets in satisfaction of creditors’ claims.  If the proposal is not approved, a bankruptcy order may be rendered.



The debtor will designate some or all of its assets for its creditors, propose that those assets are sold (or transfer to third parties), and that the proceeds of the sale should be distributed to creditors. A debtor wishing to restructure (or a creditor having the right to institute bankruptcy proceedings) may apply to the competent execution court with a reorganisation project. If the execution court determines that the project is likely to be successful, it will order a creditors’ meeting to decide whether they accept the reorganisation project. If approved, the project will then be submitted to the court for approval. If the court determines that reorganisation will be more lucrative than bankruptcy, it will approve the project.



A debtor company facing financial difficulty or imminent risk of insolvency has the right to apply to the commercial court for approval of a restructuring project previously approved by the required quorum of creditors affected by it (impaired creditors).

The new EBC (Enforcement and Bankruptcy Code) provisions encourage the debtor and its creditor to reach a voluntary arrangement to rehabilitate the distressed but still viable business. The contents of the proposal enter into force after acceptance by the creditors and approval of the court. However, creditors have the right to apply to the court for relief if the debtor does not fulfil its obligations under the project. The court has a right to declare the debtor bankrupt following any non-compliance. Restructuring is only available for companies and co-operatives with the exception of banks and insurance companies.


Ordinary bankruptcy

The creditor begins this form of proceeding by requesting the execution office to serve on the debtor an order to pay for a due debt. The debtor has seven days after service in which to dispute the debt or pay. If the debtor fails to pay or dispute the debt, the creditor may apply to the commercial court for a bankruptcy order, which the court will generally grant.


Direct bankruptcy

A creditor or the debtor may file an application for direct bankruptcy. The debtor must submit a list of assets and liabilities together with the names and addresses of creditors. The creditor may apply for direct bankruptcy where: the debtor has absconded to avoid its obligations (transfer of the headquarter abroad); the debtor has engaged in fraudulent transactions which threaten the interests of creditors; the debtor has concealed assets to avoid execution; the debtor has suspended payments as they fall due to creditors; the debtor has failed to satisfy a final judgment served on it by the execution office; a voluntary arrangement proposal has been rejected by the court or a moratorium period is cancelled by the court; or the debtor may apply for the bankruptcy of the company on the basis of inability to pay its debts as they fall due in case of the debtor’s liabilities exceed its assets.


Consequences of bankruptcy

The bankrupt loses control of its assets and only the administrators have the authority to dispose of assets in the estate. If the bankrupt has no assets, the value of the assets is insufficient to cover the costs of the proceedings or the creditors are not prepared to put up the costs, the bankruptcy may be suspended.

The first meeting of creditors is convened, during which are appointed three bankruptcy administrators, and it is considered whether it is appropriate to propose an arrangement. The second meeting of creditors is to consider the delay and manner of the disposal of the bankruptcy estate (often by public auction), then to fix the order of priority for the creditors who have lodged their claims.

The claims of a higher rank of creditors must be satisfied in full before creditors of a lower rank receive a dividend, but creditors rank equally within each class. Creditors whose claims remain unsatisfied receive a certificate of insolvency.

Transactions performed by debtor in a state of insolvency up to one year prior to the bankruptcy order, free transactions up to two years prior to the bankruptcy order or transactions executed with the purpose of damaging a creditor’s interests up to five years prior to the commencement of legal proceedings for recovery of the debt (including bankruptcy proceedings), can be subject to an annulment recourse by a creditor. The administrators make a final report to the court which then makes an order closing the bankruptcy.