The Turkish economy: its strengths and weaknesses

The Turkish economy has occupied the first ranks within the G-20 several times. However, the Turkish economy does not depend for its growth on esoteric wealth resources such as oil and gas, which are prohibited from extracting under international agreements (Treaty of Lausanne) that will expire at the beginning of 2023; all this didn't prevent the Turkish government from achieving several accomplishments in various fields, such as heavy military industries, in which they achieved self-sufficiency, in addition to the areas of international trade, which also allowed Turkey to rank first in the world in terms of the value of exports for the year 2021, while the world was suffering from the ecopolitical and pandemics affects which Covid-19 left.

Moreover the field of agriculture, Turkey has reached the stage of self-sufficiency and exports to various neighboring countries, Europe or the African continent.

And in uncountable fields, Turkey has become a leader in several areas such as tourism, garment, and food industries. According to the World Bank database figures, we find that the Turkish economy, despite all the national and international problems, reached about 5.05 trillion liras in 2020, equivalent to 720 billion dollars; also, despite the decline in growth rates in several countries, Turkey achieved a positive growth rate of 1.8% during the past year.

But there remains a puzzling question: Why is the Turkish economy suffering from inflation, the devaluation of its currency, and the deterioration of the local Turkish currency??
In this article, we will answer all the questions:

The problem of energy provision
One of the fundamental problems that stand in the way of the Turkish economy is the problem of energy provision, Due to (the International Treaty of Lausanne), which prevented Turkey with several other countries from extracting energy sources, such as oil and gas. Therefore Turkey imports its oil need at a tremendous rate estimated at 90% of its markets, from Russia and Iran.

But with the increase in the need for energy sources, the Turkish government worked to encourage the private and joint sectors to generate the necessary energy from other sources, such as (solar panels, thermal and wind, as well as nuclear), and therefore several Turkish companies worked to participate in clean natural energy generation projects, such as the Turkish company Sur-Yapı on (Building wind power fields), and building several areas in different places in Turkey.

Also, some joint sector companies offered natural power generation fields for foreign and local investment, which opened a new door for investment in Turkey. However, this sort of investment sector was exempt from several taxes, such as Income tax.

Despite that, has the power generation problem been solved in this way? The answer is no because the rate of production and processing of energy fields is costly. Meanwhile, only 20% of the national energy need was produced, and Turkey couldn't reduce the rate of importing gas and oil from neighboring countries.

But again, the good news here is that Turkey has discovered oil fields within its borders in both the Mediterranean Sea and the area belonging to the Turkish Cypriot. Still, the Turkish government and private companies will not be allowed to extract oil and gas until 2023.

However, we can imagine the measure of the economic recovery and flourishing that Turkey will witness during the next two years, in addition to the value of the Turkish real estate, which will see an unprecedented rise, which will make Turkey one of the most expensive countries in terms of property value and investment return as well.


Short-term private sector debt to European banks:
One of the most critical factors affecting the Turkish economy, which also puts pressure on economic progress, in addition to the problem of energy generation sources, Is the problem of private sector companies' reliance on external financing from European banks in most cases.

But one of the most significant achievements of the Turkish government in the years 2020-2021 is the elimination of debt to the Central Bank, in addition to reducing the debt of private companies from 440 billion dollars to less than 50 million US dollars, which constituted 65% of the total foreign debt owed by Turkey, which allowed most companies to pay their obligations as a result of accumulating taxes with interest to the government.

But among the most important things that came with the economic plan announced by Turkish President Recep Tayyip Erdogan at the end of last year in December, which stipulated the possibility of transferring assets of private companies and citizens into the Turkish currency while ensuring the payment of losses to Turkish citizens and companies in the event the lira fell against foreign currencies, This allows reducing the pressure caused by short-term debt, which is creating continuous and rapid forces in demand for the dollar.

Thereafter this means that the problem of private sector debt in the government is largely solved.

Although and as a logical result, we can say that despite all the positives and negatives related to the Turkish economy, the Turkish economy will continue to grow significantly, which will witness a qualitative leap due to the end of (the Lausanne Treaty), which will solve the problem of importing raw materials from Russia and Iran.

Also, the natural Bosphorus Canal, which is freely open to international shipping carriers, won't be accessible after the expiration of the Lausanne treaty, which will create a new national source of income for Turkey.

Although Turkey is working on digging a new industrial water canal west of Istanbul, linking the Black Sea and the Sea of ​​Marmara, on closing the natural Bosphorus in the heart of Istanbul, and on this basis, the pollution level will decrease to nothingness. Thus the standard of living in Istanbul will rise, becoming one of the best cities to live on the environmental group and a high standard of living.

Therefore we advise you if you have the intention to invest in Turkey, the opportunity is now still available to invest in a property, the prices of which will soon double, So if you have any question or inquiry that needs expert advice, contact us and let our consultants give you what you deserve.