Economic Studies


Population 78.1 million
GDP per capita 9,186 US$
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major macro economic indicators

  2014 2015  2016(f) 2017(f)
GDP growth (%) 3.0 4.0 2.5 2.7
Inflation (yearly average) (%) 8.9 7.7 7.9 8.0
Budget balance (% GDP) -1.4 -1.3 -1.8 -2.8
Current account balance (% GDP) -5.5 -4.5 -4.7 -5.0
Public debt (% GDP) 35.0 35.0 33.0 33.0


(f) Forecast


  • Healthy public finances
  • Demographic vitality
  • A market with 75m inhabitants and a growing middle class
  • A pivotal regional position, especially for gas (TANAP, Turkstream)
  • Customs union with the EU
  • A cleaned up and resilient banking sector
  • Large industrial groups


  • A substantial current account deficit and lacking domestic savings
  • Dependence on foreign capital, especially portfolio capital
  • R&D spending representing only 1% of GDP
  • Company debt in foreign currencies (net open position = 30% of GDP)
  • The large informal economy (28%) and low female participation
  • A delicate domestic and foreign policy (issues of Kurds, Syria and Iraq, attempted coup)
  • Authoritarian tendency of government
  • Lacking productivity of agricultural sector and large shortfall in meat
  • Development delays in the eastern part of the country


Low growth despite budgetary support

With the deteriorated domestic political situation, rising unemployment and inflation increased by higher food prices due to the weaker currency, household consumption is likely to pause for breath in early 2017. Further out, unless the political and security situation further deteriorates, it could pick up again, but far less quickly and remain the driver behind activity. Consumption should be underpinned by the countercyclical budgetary policy, for which support measures should represent 0.5% of GDP for the year. Households have benefited from the restructuring of their tax debts and consumer credits arrears. The 30% increase in the minimum wage in 2016 should continue to have a beneficial impact. Despite a support programme including lower taxes and social charges, debt relief, as well as credit facilities to favour exports, renewable energies, research, foreign investment and the regions affected by terrorism, private investment could stagnate. Public investment should maintain its comfortable growth with further major infrastructure work in energy and transport. The contribution to growth of trade in services and goods became negative in 2016 after the tourism industry collapsed (41% less revenue over the first nine months of 2016, in a sector accounting for almost 10% of GDP), and could be neutral in 2017. With the lifting of Russian sanctions from August 2016 and aid for tourism (USD 500 million), sales of agrifood products and the number of tourists could increase. Car, household electricals and clothing sales should benefit from robust demand in Europe and the depreciation of the Turkish lira. The construction sector could benefit from its diversification into Africa and the recovery in nearby markets. In terms of imports, the likely increase in energy prices should be partly offset by the downward impact of the lower pound on purchases of imported goods and the higher tax on vehicle purchases (from 45% to 160% depending on the engine type), 69% of which are imported. However, monetary policy is likely to influence the pace of the recovery. If the domestic political situation were to worsen, provoking investor mistrust and a capital flight, the central bank would face a dilemma. Should it accept a further depreciation of the pound, which is worrying for the population with a 10% decline against the euro and the dollar prompting additional inflation of 1.8% over the next 12 months, or should it raise its key interest rates in order to counter the depreciation at the risk of weighing on activity? The central bank was already obliged to implement a first rate hike in November 2016 in a move unseen since 2014.


Solid public finances, fragile foreign balance

In view of the support plan and momentum in infrastructure construction, the public deficit is likely to increase and move towards 3% of GDP. The EU’s ongoing payments under the agreement on refugee management and savings on current spending should only partly offset this. However, the weight of debt is likely to remain weak. A source of concern nevertheless lies in the state guarantees provided under the framework of private/public partnerships. After two years of decline, the hefty current account deficit caused by the trade deficit and debt servicing is likely to increase. The slow recovery in tourism and the beneficial impact of the lira’s depreciation on exports may not fully make up for the increase in the cost of imports and debt servicing, influenced both by the depreciation and the hike in rates. Managing the current deficit is a major challenge: given the weak level of foreign direct investments and the lack of domestic savings, the country depends on foreign portfolio capital investments, the volatility of which is increased by the deteriorated political situation. Exchange rate risk is high for companies and banks with high debt in foreign currencies, even if plenty of them have resources in currencies and some of the debt corresponds to commercial credit that is not very volatile. Exchange rate reserves could prove insufficient in the event of a sudden and massive withdrawal of capital, obliging the state to intervene.


Authoritarian tendency and concern for the rule of law

The attempted coup on 15 July 2016 helped president Erdoğan strengthen his position. The state of emergency declared on 27 July 2016 enables him to govern by decrees, which (after approval by Parliament where the governmental islamo-conservative party, AKP, has the absolute majority since the early elections called in November 2015), are exempt from the control of the constitutional courts. The servicemen, magistrates, journalists, teachers and corporate heads accused of being involved in the coup and/or of conniving with the fraternity of the preacher Gülen, considered by the government as the instigator of the coup, have been arrested in large numbers. The immunity of deputies accused of backing the armed Kurdish movement (PKK) has been removed. Investors could be alarmed by the instrumentalisation of the Kurdish issue, the implication in the Syria/Iraq conflict and its local overflows (terrorism), the switching between the US and Russia, the use of nationalist and religious motivation as well as breaches to the rule of law (referendum validating the presidential pre-eminence planned for spring 2017). Positive signs exist: return to normal relations with Israel, Russia and Egypt, the end to international sanctions against Iran, the construction of gas pipelines, reform of the job market, acceleration of company creation formalities or development of household savings to reduce the dependency on foreign capital.


Last update : January 2017



In the domestic market, traditional instruments for credit payment are still in common use as they not only constitute a means of payment but also can often serve as negotiable instruments.


This is the case for promissory notes in regular use for commercial transactions by smaller and medium-sized companies. Similarly, with the postdating of cheques a commonplace practice, the cheque serves as both a title of payment and a credit instrument. Cheques circulate in the domestic market as negotiable instruments until the maturity date.


The new law on cheques, in force since December 2009, focuses on protection of the rights of cheque holders (beneficiaries) and institutes three categories of cheques – cheques for business users, cheques for consumers, and pre-printed bearer cheques – to facilitate tracking this payment instrument and to combat the underground economy.


Although banks are now required to exercise greater vigilance as regard the profile of their clients, the law also provides for large financial sanctions payable by the drawer of the cheque in case of non-payment.

Likewise, according to the amendment on 3 February 2012, the drawer of a dishonoured cheque will be banned from drawing cheques and / or opening cheque accounts for 10 years, by decision of the public prosecutor (administrative sanction instead of penal sanction).


There are, as such, particular advantages deriving to creditors from the use of negotiable instruments like bills of exchange, promissory notes, and cheques – provided they have been duly established and that any legal action is taken within the legal limitation period. They enable creditors, without obtaining a prior ruling, to approach directly the enforcement office (Icra Dairesi) for service on the debtor of an injunction to pay and then, as necessary, to proceed with the seizure of the debtor’s assets.


The debtor has 10 days to settle the arrears in question or 5 days to approach the enforcement court and to oppose payment on grounds that, for example, the signature on the document is not his own or that the debt no longer exists. In case of opposition on abusive grounds, the debtor is liable to large penalties.


Finally, for rapid and secure processing of bank transfers, the SWIFT electronic network is well-established in Turkish banking circles and constitutes the most commonly used instrument for international payments.


Debt Collection


Out of court settlement is always advisable to taking legal action, and as a result, the sending of formal notice to pay, followed up by repeated telephone calls, remains a relatively effective method. As well, on-site visits can moreover pave the way for restoring communication between the supplier and his customer and thereby enhance the chances for negotiating a transaction.


Depending on the debtor's solvency, the terms the transaction can range from payment in full to repayment by instalments, or even to a partial payment as final settlement.


In the absence of a voluntary settlement, the threat of a bankruptcy petition (iflâs) is a frequently employed tactic to elicit a response from the debtor and prompt him to repay the arrears.


In cases where the validity of the claim is disputed, the only recourse is to initiate the ordinary proceedings via a summons to appear in court.


In cases whereTurkeyhas not signed a bilateral treaty or a reciprocity treaty with the plaintiff’s country, the plaintiff will be required to put up a surety bond,judicatum solvi, representing about 15 % of the claim, with the competent local court. It's the same with a Turkish applicant who has no permanent residence inTurkey.


At the commencement of the proceedings as well, the plaintiff must also put up one quarter of the court fees, which are proportional to the amount of the claim.


The ordinary proceedings are organized in three phases: first phase involving position statements by each party (statement of claim and statement of defence); then in a second and longer phase, the court investigates the case, examining the relevance of the evidence submitted, whether conclusive or discretionary evidence ; and finally in the main hearing that constitute the third phase, the court hears the parties and their lawyers and issues a ruling.


The civil procedure code specifically states that the judge may at any time during the legal action encourage amicable settlement of the dispute, provided that it results from a real desire by the parties to seek an out-of-court settlement via a negotiated transaction.


The “LAW ON MEDIATION IN CIVIL DISPUTES” (Law No. 6325) has entered into force completely on June 22,2013. The Law stipulates that mediation shall be applied only in the resolution of private law conflicts, including those having a foreignness element, arising from acts or transactions of interested parties who have the capacity to settle such conflicts.


In this context; mediation is defined as “a method of voluntary dispute resolution system carried out with the intervention of an impartial and independent third party who is specially trained to convene the relevant parties by way of systemic techniques and with a view to help such parties mutually understand and reach a resolution through a process of communication”.

Mediation is, first of all, is a dispute resolution system. However, this resolution system is a voluntary dispute method.


Here, the parties create their own ways of solution by themselves and they try to understand each other while doing this. Mediation is based on the principle of doing meetings and negotiations and is entirely a process of communication. While the parties are creating their own ways of solution, an impartial and independent third party (a mediator) who enables the parties to establish communication, have meetings, understand each other shall be included in the process.


On the other hand, the parties are free to apply to a mediator, to continue the process, to finalize or to abandon the process.The parties may also settle on the issue of applying to a mediator before the filing a lawsuit or while the lawsuit is pending; and the court may advise, encourage the parties to apply to a mediator.


The commercial court (asliye ticaret mahkemeleri), which is a specialized chamber of the court of first instance, is competent to hear commercial disputes and insolvency proceedings. Commercial courts exist in the main Turkish cities.


To combat against lengthy lawsuits and courts workload, the new civil procedure code, effective as of 1st October 2011, aim to accelerate and simplify the proceedings.


Also, the parties have to submit their arguments of defence, their counter claims and available evidence at the commencement of the trial. These documents will be reviewed by the court during a preliminary hearing, in the course of which the parties will be encouraged to compromise.


The litigants’ examinations and cross examinations will now be conducted by lawyers to discharge the judges who had so far a great tendency to resort to expert opinions to assist them in the content of the judgment. That is why, the new code limits the list of technical and scientific experts registered with the Ministry of Justice.

Insolvency Trend Turkey
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