Last Updated on 20/04/2023
With some negative echoes in the western media, foreign business people might hesitate to invest in Turkey. They probably wonder about the economic situation in the country and whether it is worth investing in.
To answer all these questions clearly, it is recommended to think wisely. We should perform a macro analysis to determine whether the target country is investable before even getting into the nitty gritty details of investing abroad. Our Turkey-based experts conducted on-ground research based on trustable economical data. And here is the conclusion.
A favorable economy to invest in Turkey
Contrary to what many Westerners believe, Turkey is not simply a third-world country. Yet, Turkey has become a significant powerhouse on many levels in the last 15 years.
In all fairness, Turkey turned into a respectable economic, military, cultural, and political superpower after it was a backwater about 2 decades ago. Therefore, the developing country has all the favorable circumstances to encourage foreigners to invest in Turkey.
The World Bank classifies Turkey as an upper medium income nation. The country was dramatically transformed by a concentration on long-term reforms, infrastructure development, free trade agreements, access to public services, and a sharp decline in poverty levels. In fact, the poverty rate in Turkey fell dramatically from 37% in 2003 to 8.5% in 2018.
Continuous GDP growth
According to Tradingeconomics.com, the global recession of 2008 caused a wobble in Turkey’s economy, which rebounded fast and kept rising. Moreover, due to the minor constraints to managing the COVID crisis in 2020, Turkey was one of the few major economies—along with China, Egypt, and Vietnam—to see GDP growth.
Fiscal balance under control
In the West, mismanagement, debt, and currency problems are often mentioned concerning Turkey However, in reality, budget management has been rather conservative for the last 2 decades. Therefore, the fiscal balance has been surprisingly under control. In fact, in March 2022, Turkey’s Fiscal Balance had a deficit of 2.3 % of its Nominal GDP, down from 2.7 % the previous quarter. This data is considered encouraging compared to -2.5% and -6,7%, respectively, in Germany and the UK ( March 2022).
To clarify, this is an important aspect to decide whether it is worth investing in Turkey or not.
Source: https://www.ceicdata.com/en/indicator/turkey/consolidated-fiscal-balance–of-nominal-gdp
Low debt to GDP Ratio
The budget deficit was more than covered by the economy’s robust expansion, which resulted in a falling debt-to-GDP ratio up until the past few years when the economy started to struggle a little.
However, according to official data, we can affirm that the government debt to GDP ratio has remarkably decreased from 75% in 2001 to 42% in 2021.
Moreover, it is fair to acknowledge that the government was able to construct spectacular infrastructure all around the country. You will be surprised to see the unique roadway systems, medical facilities, vast university campuses, and sports facilities spread throughout Turkey. This is to say that the government has succeeded in developing a country with a global class infrastructure without incurring significant debt. We can’t deny that some debt accrued, but it is evident how it was used. It increased capacity and created a favorable infrastructure to invest in Turkey. Therefore, it is still helpful to both locals and investors.
Efforts against inflation increase
Objectively, we can’t deny the current high inflation rate. However, official data reveal that hyperinflation has always been a challenge in Turkey. Yet, in the last 2 decades, the Turkish government significantly reduced it with the right reforms. We should mention that the inflation rate recorded at 11,86% in 2020 after 68% in 2001. But in Turkey, it is a chronic problem constantly present andi s likely to appear again at any time. However, government efforts keep going to solve this issue.
Why invest in Turkey
International investors from a wide range of industries are drawn to invest in Turkey because of its expanding economy, strategic importance, and unrivaled potential.
This situation is due to many factors such as economic expansion, domestic and open markets, and strategic location. We should also mention the cost-effective high-skilled labor class. Moreover, the government provides advantageous incentives to investors thanks to ongoing reform. Therefore it helps to establish beneficial ecosystems creating excellent opportunities in various fields.
Learn more about the reasons and best sectors to invest in Turkey.
Best ways to invest in Turkey
Invest in Turkey’s real estate
Currency issues have been one of the most challenging situations in Turkey recently. Even though the Turkish Lira is predicted to rebound, indeed, it won’t happen for another two to three years, according to experts. We can’t deny that this situation might make people hesitate to invest in Turkey. Yet, facing this situation, experts guarantee that Real estate is a suitable investment. And Turkey seems to be the perfect place for this sector. If you’re looking for a medium- to a long-term project with potential for capital growth, you definitely should consider the Turkish real estate market.
Ironically, the Turkish real estate market has benefited from the Turkish Lira’s depreciation. As demand rose, so did home sales. Prices increased, as a result, making up for the currency loss and maintaining real estate value. As a result, the market achieved equilibrium again, making Turkey’s real estate market stable and secure.
You can have a more detailed explanation if you still wonder whether it is a good time to invest in Turkey real estate.
Startups: a clever way to invest in Turkey
Startups impact on national and global economies.
With the worldwide technological progress and recent globalization, Startups have positively impacted the country’s economy. In fact, we are talking about worldwide ecosystems that eclipse geographic boundaries and affect many nations’ economies.
Startups are now a crucial component of a country’s value proposition for foreign investors, regardless of what they operate. It can be in the fields of technology, mobility, biotech, or anything else. Countries must seriously market their own startup ecosystems and value propositions to the rest of the globe to draw FDI. In fact, The rise of startups with goals for global expansion has significant effects on the flow of foreign direct investment (FDI) around the world.
Invest in Startups in Turkey
To relate, Turkey is entirely aware of the Startup’s economic importance. In fact, Between 2011 and 2021, Turkish startups raised $2.3 billion in investment, and $6.4 billion in exits and secondary transactions occurred within that same time.
Despite the COVID-19 pandemic, early-stage investments, which typically range from $100 to $150 million yearly, soared to $1.6 billion in 2021. With $1.2 billion raised in the first quarter of 2022, this growing trend has persisted throughout the year.
Significant investments have been made in these funding and exits by foreign investors. Many Turkish startups are recognized in London and New York. This is quite an accomplishment compared to traditional sectoral investment programs. Actually, a decade ago, the Turkish startup environment practically didn’t exist. This is to say that establishing a Startup is a clever and profitable way to invest in Turkey.
Moreover, the investment Office of the Presidency of the Republic of Türkiye has contributed to facilitating the establishment of Startups in Turkey. It was conducted to develop updated legislations allowing the government to participate as a limited partner.
If you want further details about investment in Turkey, MEO Consultants offer you a complete advisory.
Learn more about our services.
