Turkey – on its way to a mature economy

  • Turkey is energy poor, has very little oil and gas production and therefore imports significant amounts of oil, gas and coal. It has broken free of developing nation status and is on its way to becoming a mature economy. The country has seen an enormous uplift in per capita GDP since 1970 that now stands at $8,500 per capita per annum.
  • With borders to Greece, Syria, Iraq, Iraqi Kurdistan and Iran, Turkey is surrounded by chaos. A predominantly Islamic country, it is populated mainly by ethnic Turks (not Arabs) and has an extremely rich history and culture. Let us hope that recent riots in Turkey are not a sign of the rot spreading from its neighbours.

Figure 1 In line with many Islamic nations, Turkey’s population has more than doubled since 1970. But GDP in this energy poor nation has increased 6 fold.

Figure 2 Turkey’s population structure is undergoing the Demographic Transition with slowing birth rates and growing numbers of elderly giving rise to a bee hive shaped population structure as opposed to the pyramidal structure of developing nations.

Figure 3 Turkey has some indigenous coal and hydro production. But total energy production (30 million tonnes oil equivalent – TOE) is well below consumption of 120 million TOE (Figure 4) leaving Turkey with hefty energy imports (Figure 5). Turkey has no significant oil or gas production and BP does not report the statistics. The EIA report crude oil production of 46,000 bpd and gas production of 27 billion cubic feet (BCF) per annum, which are both tiny amounts relative to consumption and are ignored in this analysis.

Figure 4 Energy consumption has expanded 13 fold since 1965. Oil consumption has been flat since the mid 1980s. It would be interesting to know what underlies this statistic. I suspect that car ownership has continued to expand countered by oil-fired power generation being replaced with coal and gas. Most recent growth in energy consumption has been gas and coal. Turkey imports gas by pipeline from Russia, the FSU (Azerbaijan?) and from Iran. It appears imports from Iran have continued despite sanctions. Turkey also receives LNG from all over the world but Algeria is the main supplier.

Figure 5 With energy consumption greatly in excess of production Turkey has significant imports of oil, gas and coal which it pays for through exporting manufactured goods and services like tourism (Figure 6).

Figure 6 Turkey has seen bilateral trade expand strongly and has managed to keep its trade deficit under control despite energy imports and rising energy prices. The cumulative deficit since 1970 is $158 billion which is 25% of current GDP.

Figure 7 Per capita GDP has increased 3 fold since 1970 whilst per capita energy consumption has increased 4 fold. As discussed in Figure 8, Turkey is on an efficient energy-GDP trajectory that seems inconsistent with energy consumption rising faster than GDP. There can be two explanations for this. The first is that Turkey may have a growing number of economically inactive citizens – young, old and unemployed – who consume energy but produce little. The second is that more energy is being used for comfort than for production, e.g. leisure driving and air conditioning.

Figure 8 Turkey, like Egypt, has a very simple energy-GDP evolution where more energy is used to produce more GDP. There is a very strong message here that energy is vital to GDP growth and wealth creation and energy policy should therefore be taken very seriously by all governments. The apparent loss of efficiency in GDP per TOE consumed is explained in Figure 7.

Figure 9 The energy-GDP evolution for Turkey compared with other countries. It should be clear that Turkey is an enormous success story, breaking free from “poor developing” status, on its way to becoming a mature economy and wealthy nation. Its current per capita GDP is similar to oil rich Libya, prior to the NATO led bombing of that country. But Turkey has achieved this through hard work and not simply fortuitous oil and gas flows.

[1] BP: Statistical Review of World Energy 2013
[2] UN: National Accounts Main Aggregates Database

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6 Responses to Turkey – on its way to a mature economy

  1. Hi Euan,

    Impressive economic performance.


  2. teo says:

    Dear Euan,

    You are doing a tremendous job. I am reading constantly your blog.

    But the economic data of Turkey is a little bit wrong.
    The country has a structural trade deficit.
    Numbers look like this :

    Last year they had a trade deficit of 100 billion dollars.

    Adding the need to roll debts, total financing needs of Turkey are around 200 billion dollars/year.

    “Turkey’s problem is that it has been living in a credit bubble funded by foreign capital seeking high returns in a low-rate world. Unfortunately, capital inflows mainly financed a consumer boom that was not supportable by the Turkish economy.”
    So basically the “impressive economic performance” of Turkey is resumed at borrowing 200 billion a year – mainly from the Gulf – in order to support a building spree and a consumer boom on credit.

    Spengler ( David Goldman ) explains perfectly:
    “Turkey is in trouble because the Turks aren’t very good at anything in particular, but acted as if they were the next China. They borrowed vast sums from the international market against a glorious future that was never to be. Among all of the world’s big economies, Turkey has the worst current-account deficit, at nearly 8% of economic output, roughly where Greece was before its national bankruptcy. Investors reckoned that with high economic growth, Turkey would have no problem carrying its debt; what they did not take into account is that the growth itself was largely an illusion, a carnival of consumption and construction that depended on increasing debt in the first place,” . Numbers got worse since Spengler wrote.

    Of course Turkey’s money came from oil and gas flows. That is the source of Saudi money. And Ryadh is the number one source of capital for Turkey.

    • Euan Mearns says:

      Teo, thanks for this. As far as I can tell the magnitude of exports and imports on Tradingeconomics is similar to the UN data I’m using, but the balance is clearly different. I have to admit I was surprised by the data – Turkey a model of sound economics? I’ve just been looking at the UK data, and it too looked surprisingly good. By inference the UN data are wrong. I wonder why? They report “Imports of goods and services” and “Exports of goods and services” – that’s what I’m charting and taking the difference to get the trade balance.

      Any other free sources of this type of data?

      • teo says:

        I do not know what was the problem with the UN data. Maybe they describe the entire payment balance, including borrowing. I never used those.

        The link is about balance of payment. For example Japan could run a trade deficit but still have a positive balance of payment in 2012 – due to foreign investments.

        WTO also has good data.
        You can download the report here:

        All data in centralized form are from 2012. The report from WTO is pretty complex. In an already processed form , but with data from 2011, you can find it at:

        If you look for an individual case , it’s easier. You can find very new data.
        Centralized data tables for all the countries are pretty old.

        As a rule of the thumb, of all the major industrial countries, only China and Germany have a trade surplus.
        Everyone else is in the red. Some worse then others. ( OK, South Korea might also have a positive trade balance, but it is a complex case.)
        Great care with cases like Netherlands or Singapore. Those are financial centers used by various capital exporters like Russia or China.

        PS. UK is a Turkey on steroids, from a financial point of view. They compete for the same limited resource – the surplus petrodollars of the Gulf and Russia.
        PPS. Your blog is spectacular. I am very grateful to you for all the amount of work spent into giving a usable shape to a huge quantity of raw data.
        You create images out of dry numbers.
        Please accept my apologies for the input. I am extremely sad that my first post had to contradict something, but there was nothing I could have added before.
        Can you please correct the blog post? It is an absolutely undeserved little annoying stain on a great piece of work ie your blog.

  3. Ralph W says:

    Turkey has the highest retail petrol and diesel taxes in the world, iirc. That goes a long way to explaining the flat oil consumption whilst all other fuel categories are climbing rapidly.

    Their expansion of hydro is excellent use of local renewable power sources, however expansion of hydro will hit severe geographical limits at some point.

    Overall, however their energy balance is going in the wrong direction almost as fast as the UK’s, so I do not see this economy as any more sustainable than any other in the European region. They are undoubtedly in a better position than we are, but they will no more be able to grow themselves out of debt in the face of peak oil and declining net energy in the long run. How long their exports will grow to match the inevitable rise of imported energy costs is very uncertain.

    Politically, they are a very different setup. Secular government and industrialisation have served them well until now, but they are a Muslim nation, and are being dragged into the growing ME conflagration, with the current leadership showing strongly authoritarian tendencies. They have a large and previously restive Kurdish minority in the east, who are not going away any time soon.

    The population has benefited from rising personal energy consumption, but if the economy stagnates, rising unemployment among younger men could lead to radicalisation. Their relatively homogenous ethnic and religious mix should reduce tensions, not least because by Islamic standards, female rights and social status are very high.

    I think the biggest danger is the emergence of a strong nationalist leadership in the face of a stagnating economy. Which is close to what we have now.

    • teo says:

      “How long their exports will grow to match the inevitable rise of imported energy costs is very uncertain.”

      Considering that last year they had a 100 billion trade deficit ( + a similar amount of rolled debts) there is no matching. Never was any.

      “Their relatively homogenous ethnic and religious mix should reduce tensions, not least because by Islamic standards, female rights and social status are very high.”

      There is a big difference between 2 subsets of the population. The majority which brought Erdogan to power is very traditional. The former ruling minority which is the secular part. Their grip on various levers of power and their influence is being eliminated by the government.
      A simple walk in any popular neighborhood of Istanbul would make everything clear for the observer regarding where the Turkish population stands. The rest of the country is even more traditional.

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