Turkey has a strategic geographic location and an open, and increasingly liberal, trade and investment climate. A young and rapidly growing population provides a key ingredient for robust long-term growth potential. Turkey is still a major convergence play for investors, despite brewing political risks and a lack of progress in the EU accession process. While Turkey's public debt load is low by regional standards, the private sector's rampant external borrowing in previous years has greatly increased macroeconomic vulnerabilities.

We keep our clients informed of the latest market moves and political developments as part of our 'top-down' and 'bottom-up' perspective in Turkey. Clients also benefit from in-depth analysis on 25 of the country’s most important industries. We provide interactive data and forecasting alongside detailed and risk-assessed analysis from our expert teams. We aim to keep you ahead of the curve, so you can do business with ease in Turkey.

Turkey Country Risk

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Core Views

  • Turkish President Recep Tayyip Erdogan will tighten his grip on power in the near term, following the failed coup on July 15-16. However, this will raise long-term political risks in the country, and further strain relations with the West.

  • Turkey will operate under a de-facto executive presidential system under Erdogan, with negative implications for institutional quality and government checks and balances.

  • Turkey faces a challenging foreign policy environment amidst heightened regional tensions and rising domestic security risks as the government attempts to cement its role as an economic and political power in the region.

  • A collapse of the government's ceasefire with the Kurdish separatist PKK is a major step back for the country, weighing on growth potential.

  • Relative to the...

Turkey Operational Risk Coverage (9)

Turkey Operational Risk

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BMI View: Turkey's labour market inhibits the business environment due to the low skill level of the workforce and limited participation, particularly among females. This means that Turkey is currently unable to harness its favourable demographic situation by turning its large, young population into skilled workers. Consequently, businesses face a heightened need to import foreign professionals and provide additional training for Turkish employees, which entails additional costs and bureaucratic obstacles. Nevertheless, for businesses willing to overcome these risks, Turkey offers one of the largest and most highly...

Turkey Crime & Security

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BMI View: Turkey is facing a period of heightened political instability which poses numerous risks to the safety of business operations in the country. The July 2016 coup attempt and the crackdown which followed have elevated political uncertainty, undermined confidence in public institutions and weighed on investor sentiment. Additional threats stem from the country's internal conflict with Kurdish militants; devastating attacks launched by IS; and tensions with Russia and NATO over the Syrian conflict. Social tensions are also growing and may result in higher incidences of violent crime. While the police force is considered to be effective, an increased usage of firearms may exacerbate crime rather than lower it....

Turkey Labour Market

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BMI View: The challenges posed to businesses seeking to recruit from Turkey's labour market are hindering the country's appeal as a location for investment. Businesses face recruitment difficulties despite the advantages of a large and highly urbanised labour force, with many workers seeking formal employment, due to educational shortcomings, a lack of vocational training and rigid labour regulations. While low labour costs had previously offset these risks, rising wages are undermining the country's competitiveness even for low-skilled and labour-intensive businesses. Consequently, Turkey underperforms on a regional comparison in the BMI Labour Market Risk Index, placing 22nd out of 31 countries in the Emerging Europe region, with a score...

Turkey Logistics

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BMI View: Turkey offers investors a more attractive logistics network than most of its peers in the Emerging Europe region. The country's international trade links and port facilities are highly developed, facilitating efficient supply chains for the country's key manufactured goods exports. Investment in inland transportation options will enable the network to cope with growing trade volumes. Nevertheless, although the utilities network offers relatively good reliability, the reliance on fuel imports exposes electricity and diesel supplies to disruption due to domestic and regional security risks, which also affect the transport network. In addition, water scarcity is becoming an increasingly pressing issue...

Turkey Trade & Investment

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BMI View: Turkey's open trade regime and welcoming attitude towards foreign direct investment (FDI) has been significantly undermined in recent years. Political instability is rising due to the government's controversial and polarising agenda, as well as the resumption of hostilities with separatist group, the PKK. This internal conflict has been influenced by the ongoing civil war in neighbouring Syria, with an influx of refugees placing further strain on the Turkish economy. Ankara's growing involvement in the Syrian conflict is also causing problems with neighbouring states and Russia, which has imposed bans on trade and tourism. In addition, stalled bureaucratic reforms and lingering issues over corruption at all tiers of government remain structural issues to be addressed. Nevertheless, the absence of regulatory restrictions on trade and investment means that Turkey is ranked moderately in the...

Turkey Industry Coverage (23)

Turkey Agribusiness

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BMI View: We maintain a positive view of Turkey's sugar sector, due to the strong growth potential of the country's confectionery industry and our belief that significant changes to its sugar production quotas will likely occur in the coming years. We forecast 2016 to be a turnaround key for the grains sector. We expect corn, wheat, and barley to recover from contractions recorded in 2015, following the drought in 2014. Additionally, we expect growth in...

Turkey Autos

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BMI View: We maintain our view that vehicle sales made on credit will suffer over 2016 as households and businesses aim to reduce their borrowing and as interest rates on commercial loans and auto loans remain high.

Passenger Car And Light Commercial Vehicle Sales
f = BMI forecast. Source: Automotive Manufacturers Association, BMI

Key Views

  • Sales of heavy trucks and buses...

Turkey Commercial Banking

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Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

Turkey Consumer Electronics

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BMI View : Following on the back of weak performance in 2015 when lira depreciation hit Turkey's consumer electronics market, the attempted coup in July 2016 and subsequent government response means we now envisage an extended period of weak performance. Political and economic risks are elevated, while lira depreciation will be a drag on performance throughout the forecast period by limiting the purchasing power growth of Turkish households in global markets - ie for imported devices. We downgraded the forecast in Q4 following the attempted coup and now envisage device spending will increase at a CAGR of 0.5% over 2016-2020.

Latest Updates & Industry Developments

  • Computer Hardware Sales: Tablet...

Turkey Defence & Security

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BMI View: We maintain our forecast for steady growth in Turkish defence spending throughout our forecast period to 2025 - facilitated by robust forecast real GDP growth - and driven by still-elevated risks of terrorism, separatism and political unrest. Coupled with strong government support and evolving international trade and industry collaboration partnerships, this will ensure continued development and expansion of Turkey's already-substantial defence sector - and thus Turkish defence exports - over the coming decade.

Defence Expenditure (Turkey 2016-2020)
2015 2016f ...

Turkey Food & Drink

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BMI View: Turkey's food and drink spending growth will remain resilient over 2016 despite the attempted coup in July 2016, owing to the essential nature of the sector. The demand for food and beverages will be supported by rising disposable incomes, though slower growth is expected towards the end of our forecast period. Due to growing uncertainty in the country's political environment, we expect consumer and investor confidence to slowly decline if Turkey's outlook remains unstable.

Food and Drink Spending

Turkey Freight Transport

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BMI View: Politics will play on the Turkish freight sector in both positive and negative ways in 2016, as sanctions imposed by Russia following the Turks' downing of their aircraft will limit trade in fruit and vegetables, while the re-emergence of Iran once sanctions have been removed will have a positive influence on Turkish trade volumes. A relatively upbeat outlook for economic growth will bolster trade volumes and we are positive across the country's freight modes.

A decisive victory for Turkey's Justice and Development Party (AKP) in the November 1 snap election has been positive for the short-term growth outlook, and this will have a positive influence on trade and freight volume growth. Reduced political uncertainty is reflected in a strong bounce in the November consumer and business confidence, which will support consumption and investment in the coming months...

Turkey Information Technology

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BMI View: The attempted coup and government response in July 2016 has raised uncertainty in what was already a challenging IT market. Lira depreciation hit demand for imported IT hardware in 2015, and now with further downside - in 2016 and over the medium term - this drag will persist. We do expect medium-term recovery in IT market dynamics as the situation stabilises, but caution that downside risks are elevated and lira depreciation is likely to continue to be a drag on USD returns throughout the forecast period. We envisage Turkish IT spending will increase at a CAGR of 8.4% over 2016-2020 in lira terms, but the USD outlook is markedly weaker at a CAGR of just 1.1%.

Latest Updates And Industry Developments...

Turkey Infrastructure

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BMI View: The attempted coup in Turkey will not dampen the government's focus on the infrastructure and construction sectors and we expect the government to remain in power. While this is good news for Turkey's significant project pipeline and infrastructure policies, we note that investor sentiment towards the government, which is likely to assume a greater interventionist and authoritarian approach to the economy, may turn increasingly negative. This risks the continued success of the various PPPs currently being considered.

Latest Updates And Structural Trends

  • After a strong H116, we expect the construction sector to slow significantly over the second half of the year. Nonetheless given the strength in the first half we have...

Turkey Insurance

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BMI View: Both life and non-life are expected to record healthy growth over the coming years in Turkey's rapidly expanding insurance segment. The market will benefit from rising employment and household income rates, boosting spending on insurable items and driving demand for various life cover and retirement products. A number of major multinationals are expanding their presence in the country, competing with well established domestic providers. Headwinds to growth remain, however, including cultural barriers to traditional insurance cover, an underdeveloped regulatory system and the potential for economic and political instability.

Headline Insurance Forecasts (Turkey 2013-2020)

Turkey Medical Devices

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BMI View: We expect the Turkish medical device market to increase by 6.7% in local currency terms in 2017, although growth will be lower in US dollar terms due to local currency depreciation. Market growth will be constrained by the domestic and external economic headwinds that have arisen since the failed coup and the UK's vote to leave the EU, which has slowed eurozone growth. However, the expansion of healthcare facilities such as the city hospital complexes will help to drive market growth.


Turkey Mining

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BMI View: Turkey's mining industry is set to be on the radar of foreign investors in the years to come as the government has undertaken efforts to open up the sector, paving the way for forthcoming investment. The gold sector will attract the largest share of investment as several companies bring their projects into production. Nevertheless, Turkey's extremely poor mining safety record and weak global commodity prices will limit the industry's otherwise healthy growth.

We believe investment into Turkey's mining sector will be forthcoming over the coming years as Prime Minister Tayyip Erdogan pledged to transform the country into one of the 10 biggest economies...

Turkey Mining

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BMI View: The mining sector of the Middle East and North Africa will see strong growth in over the coming years, especially given easing sanctions on Iran. With low base effects, governmental will to increase non-oil revenues and significant resources it appears the region is set for strong growth. We highlight Turkey and Northern Iraq as key areas for growth. That said, the region will remain peripheral in the global mining sector as it continues to underperform due to political instability in much of the region.

The key issue in the Middle East's mining sector presently is Iran's ongoing negotiations with Western powers. Our core scenario is for sanctions to be eased from Q116 which will have be a game changer for the country's beleaguered mining industry...

Turkey Oil & Gas

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BMI View: Turkey will continue to increase its consumption of crude oil, natural gas and refined fuels throughout our medium-term forecast period to 2020, remaining a net importer of all three. Positive exploration results in the Thrace Basin present upside risk to our gas production forecast.

Headline Forecasts (Turkey 2014-2020)
2014e 2015e 2016f ...

Turkey Petrochemicals

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BMI View: Turkey's coup attempt has shaken the petrochemicals industry with arrests of senior managers of the local producer Petkim, but its Azerbaijani majority owner SOCAR is likely to continue investments. The pre-coup outlook had been brightening and Turkey remains a significant importer, although depreciation will support local production.

Petkim's expanded ethylene plant, which has seen capacity increase from 520,000 tonnes per annum (tpa) to 600,000tpa, supported petrochemicals output growth in H116. The concurrent increase in purified terephthalic acid (PTA) capacity from 70,000tpa to 105,000tpa also helped lift chemicals output and provided cheaper feedstock for polymers production. Petkim reported 6.4% year-on...

Turkey Pharmaceuticals & Healthcare

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BMI View: Turley will remain one of the largest markets in Central and Eastern Europe for both healthcare expenditure and pharmaceutical sales, boosted by a growing and ageing population with a high prevalence of non-communicable diseases. A poor regulatory environment, intellectual property protection issues and continued geopolitical risks with its neighbours will weigh down on growth potential.

Headline Expenditure Projections

  • Pharmaceuticals: TRY20.81bn (USD7.64bn) in 2015 to TRY22.98bn (USD7.76bn) in 2016; +10.5% in local currency and 1.6% US dollar terms. Forecast unchanged from previous quarter.

  • Healthcare: TRY106.56bn (USD39.13bn) in 2015 to TRY119.52bn (USD40.38bn) in 2016; 12.2% in local currency and...

Turkey Power

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BMI View: Our view that Turkey remains the most attractive power market in the Central and Eastern Europe (CEE) region remains in play. We foresee power demand in Turkey to be robust over the next decade, given the high levels of investment being channelled into its power sector, the country's capacity expansion plans and its improving economic outlook. Power sector expansion continues to benefit from strong political backing as the government strives for greater energy security and for reducing the country's heavy reliance on imports of natural gas through expanding domestic capacity - with renewables and domestically sourced coal leading the way. Yet, while the outlook is bright, the development of Turkey's power sector is complicated by the county's precarious economic and political position.

Turkey – Power Forecasts, 2015-2021

Turkey Real Estate

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BMI View: A tentatively improving economy and established banking sector should support growth in the commercial real estate industry in the medium term. However, in the short term the outlook is marred by security concerns, both domestically and regionally, and Russian trade sanctions, which will all dampen investor and consumer confidence.

The government's economic reform agenda, as well as a stable banking sector, provides a good backdrop for commercial real estate growth. However, domestic political issues and regional tensions have raised uncertainty about business and consumer confidence. Geopolitical turmoil from Islamic State (IS) and Russain sanctions, expected to lose the country some USD3.1bn worth of trade in 2016, will weigh in on Turkey's economic recovery. We forecast real GDP growth of 2.9% in 2016, down from 3.3% in 2015. However, the commercial real estate...

Turkey Renewables

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BMI View: Turkey will continue to be a key hotspot for renewables in Europe, due to strong government support in form of ambitious 2023 targets and financial incentives for new capacity developments. While short-term political uncertainty and economic volatility could deter some investors, the government will remain firmly behind renewables expansion plans in order to cut fuel import costs and enhance energy security - reinforcing our long-held view that the country will remain a key global renewables market.

Turkey - Headline Renewables Forecasts

Turkey Retail

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BMI View: While Turkey's economy has underperformed over the past few years, the recently elected AK Party has vowed to initiate a series of reforms to boost the economy and ensure the country retains its reputation as one of the world's most important economies. Furthermore we believe that new legislation, a recovery of the country's main trade partners as well as steady growth of household income will help generate new growth opportunities in the highly promising Turkish retail sector over the course of our forecast period.

While Turkey is expected rank as the fastest-growing economy among Organization for Economic Cooperation and Development (OECD) member countries in 2017, the economy has distantly underperformed in the past few years. The growth of the country's real...

Turkey Telecommunications

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BMI View: The launch of LTE in April 2016 has had a major impact on the market. Increased data usage, with almost 30mn subscribers using 3.4GB on average, has led to higher ARPU, higher smartphone penetration and a switch towards a post-paid-centric model, now representing almost 50% of the market. The latter has led to a recent contraction in the market as it has led to a decline in multi-SIM ownership. However, penetration remains low, at 91.7%, suggesting a potential for long-term growth in the more rural areas of the market though this will also be less profitable at the onset...

Turkey Tourism

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BMI View: Terrorist activity and the after-effects of the attempted military coup in 2016 will act as a drag on Turkey's tourism industry in 2016 and beyond. Inbound arrivals from prime source markets such as Europe have struggled, while political tensions with Russia, its second most vital source market, have also harmed the sector. Tourism will remain integral to Turkey's economy as agents target new source...

Turkey Water

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BMI View: The country's endemic water pollution issues, particularly from industrial pollutants, highlight the need for further investment into this sector. Additional legislation is also needed, and more rigorously enforced penalties.

Overall, we forecast ground water extraction to increase steadily over the next five years, however this growth will largely be catered to b y surface water sources. This is due to the combination of the fact that the country's ground water reserves are declining, and the number of dams and desalination projects are increasing available surface water. This latter factor is in turn supporting our expectations of moderate growth in consumption (both mains and non mains) as domestic and industrial users alike capitalise on the increase in water availability in many regions. Moreover, additional investment is boosting wastewater...

Latest Turkey Articles

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Latest Turkey Blogs

Latest Turkey Podcasts

  • Central banks across key emerging markets are hiking interest rates in...

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