Estimated reading time: 6 minutes

Since the capture of Constantinople in 1453, trade has been a dominant aspect of the Ottoman Empire. From the spice trade along the Silk Road to field crops and fruits, Ottoman productivity was dominant until the Empire’s relative decline in the 19th century. After the Turkish Nationalist Movement of 1923, the Turkish economy was fairly underdeveloped, with outdated agricultural techniques, poor-quality livestock, and a weak industrial base.

One century on, the economic landscape is more resembling its Ottoman eminence, and at the European Bank for Reconstruction and Development’s (EBRD) Annual Meeting and Business Forum, Türkiye took the spotlight. The EBRD’s commitment tells a story of untapped potential, as highlighted in a panel session titled ‘Türkiye’s economic transformation and growing investment potential’ on Wednesday 14 May.

Ottoman Türkiye was, in essence, land-rich but labour-poor. Today, on the other hand, Türkiye enjoys an 85-million-strong domestic market with per capita GDP exceeding $13,000 in 2023. The EBRD has invested over €22 billion in the country since 2009, which Elisabetta Falcetti, Managing Director, Türkiye and the Caucasus at the EBRD, drew attention to during the session. This isn’t just size; it’s scale with substance.

Decades of consistent growth

Turkish GDP growth expanded year-on-year in Q4 of 2024, up from a revised 2.2% in Q3, and beating forecasts of 2.6%.

Over the last few decades, Türkiye’s economic growth has been consistent and largely positive, and the country’s human capital story is equally impressive. Each year, Türkiye produces 900,000 university graduates and 400,000 vocational-technical graduates. Stanford University research highlights Türkiye’s exceptional pool of computer science and IT talent—a critical advantage in today’s digital economy.

Perhaps more striking is Türkiye’s debt discipline. According to the Institute of International Finance (IIF), emerging markets collectively reached a record-high debt-to-GDP ratio of 245% in the first quarter of 2025, a surge was primarily driven by significant increases in countries like China, Brazil, India, and Poland (notably, China’s government debt alone is expected to exceed 100% of GDP by the end of the year). Yet Türkiye’s external debt accounted for 45.1% of the country’s nominal GDP in 2023, far below emerging market averages.

Infrastructure as competitive advantage

Türkiye’s $300 billion infrastructure investment over two decades has created a foundation for sustained competitiveness. The government’s focus on digital infrastructure and AI preparedness positions the country at the forefront of technological transformation.

Significantly, Türkiye’s long-standing security challenge appears to be reaching resolution. After nearly five decades of conflict with the PKK—costing an estimated $1.8 trillion—recent developments suggest the terrorist organisation may disband, potentially unlocking enormous economic dividends.

Türkiye’s Minister of Treasury and Finance Mehmet Şimşek’s assessment is direct: “It is on track, it is working, it is delivering.” Türkiye’s macroeconomic stabilisation program has driven inflation down from a peak of 75% to 38%—a dramatic improvement, though work remains.

“I think the elections, the local elections in 2023, [made it] crystal clear, in my mind, that inflation is the number one problem. The population hates high inflation. There is only one solution, which is a period of tighter policies,” said Timothy Ash, Senior Sovereign Strategist at RBC Bluebay Asset Management.

The Central Bank’s aggressive tightening stance reflects commitment to price stability. As Deputy Governor of Türkiye’s Central Bank Osman Cevdet Akçay noted, “the less seriously the Central Bank’s stakeholders take it, the tighter it will need to stand.” This credibility-building exercise is essential for long-term stability.

External balances are strengthening. The targeted 2% current account deficit appears achievable, helped by favorable Euro-dollar parity. Türkiye’s external debt-to-GDP ratio continues its downward trajectory, reducing vulnerability to external shocks.

Financial sector leadership

Turkish banks are proving instrumental in the economic transformation. Onur Genç

Chief Executive Officer of BBVA Group laid out three critical areas where this is taking place:

• Renewable energy: Türkiye has doubled its renewable capacity in the last two and a half years. Reaching 19.6 gigawats in 2024, it reached its 2025 target one and a half years early. In this vein, Türkiye’s solar and wind energy have prevented $15 billion in natural gas imports (solar energy over the last few years have accounted for 6% of the country’s total energy supply). With continued growth prospects, this sector offers substantial investment opportunities.
• Decarbonisation: As Türkiye primary trading partner, EU climate standards drive decarbonisation imperatives. Banks are targeting hard-to-abate sectors, enabling Turkish exporters to maintain European market access.
• Digitalisation: Garanti BBVA’s achievement—89% of sales through digital channels—demonstrates Türkiye’s digital readiness. This capability helps SMEs professionalise and access global markets.

Türkiye’s economic model offers unusual resilience against global trade fragmentation. Domestic demand and investment, not exports, drive growth. Exports represent just 20% of GDP, with services adding another 10%.

More importantly, Turkish exports benefit from free trade agreements (FTAs). As of 2025, Türkiye has 23 active FTAs with various regions, including the European Free Trade Association, the UK, South Korea, and several Balkan and Middle Eastern conutries. 

The EU alone accounted for 41% of Türkiye’s goods exports in 2024. Türkiye maintains robust trade relationships with neighboring countries, many of which share deep historical and cultural ties. For instance, Türkiye’s exports to Syria have seen substantial increases, with Turkish companies investing in new freight connections and capacity, anticipating major growth in economic relations. Similarly, Türkiye has significantly increased its influence in Africa, with trade growing to $32 billion in the previous year.

As the panel revealed, Türkiye’s industrial upgrading through the HIT-30 and YTAK programs aims to localise 284 high-tech components, moving the country up the global value chain.

The panel outlined several structural reforms which could accelerate Türkiye’s development:

• The pending climate law will unlock renewable energy investments. Agricultural sector reforms could address structural inflation pressures. Expanding the UK free trade agreement and deepening EU customs union integration would boost trade flows.
• Tax reform, while potentially transformative, awaits more favorable economic conditions. Timing matters in economic policy.

—

Türkiye’s policy challenge involves maintaining Central Bank credibility while supporting real sector growth. The government has strategically redirected support toward ready-wear, textiles, footwear, furniture, and leather manufacturing—sectors with strong export potential.

Labor market data suggests resilience: 70% of displaced workers find new employment within a year, often in higher-technology sectors. This mobility indicates a dynamic, adaptable economy.

BBVA’s €8.5 billion Turkish investment reflects institutional confidence. As Genç observes, “Turkey clearly has a lot of long-term potential, and banks are here to intermediate that.”