2016 Index of Economic Freedom

Turkey

overall score62.1
world rank79
Rule of Law

Property Rights40.0

Freedom From Corruption45.0

Limited Government

Government Spending55.6

Fiscal Freedom75.2

Regulatory Efficiency

Business Freedom65.4

Labor Freedom48.6

Monetary Freedom71.5

Open Markets

Trade Freedom84.4

Investment Freedom75.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 76.9 million
  • GDP (PPP):
    • $1.5 trillion
    • 2.9% growth
    • 5.4% 5-year compound annual growth
    • $19,610 per capita
  • Unemployment:
    • 9.2%
  • Inflation (CPI):
    • 8.9%
  • FDI Inflow:
    • $12.1 billion
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Turkey’s economy has undergone a period of volatility compounded by flawed domestic politics and challenging external environments. Although economic growth has moderated, several reforms, including privatization of state assets and streamlining of business regulations, have progressed. The soundness of public finance has been maintained relatively well.

Economic Freedom Snapshot

  • 2016 Economic Freedom Score: 62.1 (down 1.1 points)
  • Economic Freedom Status: Moderately Free
  • Global Ranking: 79th
  • Regional Ranking: 34th in Europe
  • Notable Successes: Open Markets
  • Concerns: Rule of Law, Business Freedom, and Labor Freedom
  • Overall Score Change Since 2012: –0.4

Institutional weaknesses continue to hold back economic freedom and prevent more dynamic private-sector growth. The rule of law is still undermined by corruption and an inefficient judicial system that is subject to political interference.

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Background

Turkey is a constitutionally secular republic, but President Recep Tayyip Erdogan’s Justice and Development Party is pushing an Islamist agenda and eroding Turkey’s Euro–Atlantic connections. June 2015 elections resulted in a hung parliament, but snap elections in November 2015 gave Erdogan’s party a slim majority. Large-scale anti-government protests have occurred with regularity during the past two years, especially against corruption and presidential power grabs. Economic modernization is progressing despite clashes between the government and the media over press freedom and the slow pace of judicial reform. Turkey has been a member of NATO since 1952. The European Union granted the country candidate status in 1999, but there is strong opposition from France, Germany, and Austria. Turkey’s dispute with Cyprus also has delayed negotiations. The economy has been growing steadily during the past decade and weathered the 2008 global financial crisis relatively well.

Rule of LawView Methodology

Property Rights 40.0 Create a Graph using this measurement

Freedom From Corruption 45.0 Create a Graph using this measurement

Corruption, cronyism, and nepotism in government and in daily life are growing concerns in Turkey. The Erdogan government’s ongoing crackdown on its opponents has included pronounced political interference in anti-corruption mechanisms and judicial processes. The judicial system is still perceived as susceptible to political influence and somewhat biased against outsiders. Property rights are generally enforced, but the courts are slow.

Limited GovernmentView Methodology

The top personal income tax rate is 35 percent, and the top corporate tax rate is 20 percent. Other taxes include a value-added tax and an environment tax. The overall tax burden equals 29.3 percent of total domestic income. Government spending has slightly increased to a level equal to 38.5 percent of GDP. The budget deficit has been declining, and public debt amounts to about 34 percent of annual domestic output.

Regulatory EfficiencyView Methodology

The process for setting up private enterprises has become less time-consuming, but ineffective enforcement of regulations hinders entrepreneurship. Despite reform efforts, the labor market lacks dynamism due to lingering rigidities. The appreciating U.S. dollar in 2015 created a roughly 8 percent increase in the cost of natural gas, and the government announced that the state-owned gas distributing company would subsidize the difference.

Open MarketsView Methodology

Turkey’s average tariff rate is 2.8 percent. There is no general screening of foreign investment, and most sectors of the economy are open to investment. The government may not expropriate property without providing compensation. All investors face excessive bureaucracy and frequent changes in the legal and regulatory environment. Financial-system reforms have enhanced transparency and competitiveness.

Country's Score Over Time

Bar Graph of Turkey Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Turkey to other economic country groups Download Charts

Regional Ranking

rank country overall change
1Switzerland810.5
2Ireland77.30.7
3Estonia77.20.4
4United Kingdom76.40.6
5Denmark75.3-1.0
6Lithuania75.20.5
7The Netherlands74.60.9
8Germany74.40.6
9Luxembourg73.90.7
10Iceland73.31.3
11Czech Republic73.20.7
12Georgia72.6-0.4
13Finland72.6-0.8
14Sweden72-0.7
15Austria71.70.5
16Norway70.8-1.0
17Latvia70.40.7
18Poland69.30.7
19Cyprus68.70.8
20Spain68.50.9
21Belgium68.4-0.4
22Macedonia67.50.4
23Armenia67-0.1
24Malta66.70.2
25Slovakia66.6-0.6
26Hungary 66-0.8
27Albania65.90.2
28Bulgaria65.9-0.9
29Romania65.6-1.0
30Portugal65.1-0.2
31Montenegro64.90.2
32France62.3-0.2
33Serbia 62.12.1
34Turkey62.1-1.1
35Kosovo61.4N/A
36Italy61.2-0.5
37Slovenia60.60.3
38Croatia59.1-2.4
39Bosnia and Herzegovina58.6-0.4
40Moldova57.4-0.1
41Greece53.2-0.8
42Russia50.6-1.5
43Belarus48.8-1.0
44Ukraine46.8-0.1
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