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Turkey's economy is a complex mix of modern industry and commerce along with a traditional agriculture sector that in 2004 still accounted for 35% of employment. Turkey has a strong and rapidly growing private sector, yet the state still plays a major role in basic industry, banking, transport, and communications. In recent years, the Turkish economy has expanded particularly strongly, registering growth rates of 8.2% and 7.6% for the 2004 and 2005 fiscal years respectively.

Agricultural sector

Turkey has been self-sufficient in food production since the 1980s. The agricultural output has been growing at a respectable rate. However, since the 1980s agriculture has been in a state of decline in comparison to the total economy. Agricultural loans are issued with negative interest rates. Today, many of the institutions established between 1930 and 1980 continue to play important roles in the practices of farmers. Many old agricultural attitudes remain widespread, but these traditions are expected to change with the EU accession process. Turkey is dismantling the incentive system. Fertiliser and pesticide subsidies have been curtailed and remaining price supports have been gradually converted to floor prices. The government has also initiated many planned projects, such as the G.A.P project (Southeastern Anatolia Project). The advent of the G.A.P promises a very prosperous future for the southeastern agriculture.

Given all the efforts of the government, agricultural extension and research services are, in relative terms, inadequately organized in Turkey. This has been attributed to shortages of qualified advisers, transportation, and equipment. Agricultural research is distributed among nearly 100 government institutions and universities. The inability to spread the use of new technologies has been attributed to a reluctance of trained personnel to work in the field. The pay disparity in this sector is traditionally very high and incentives to train people do not cover this gap. Research is organized by commodity, with independent units for such major crops as cotton, tobacco, and citrus fruit. Observers note that coordination of the efforts of different research units and links between extension services are inadequate.

The livestock industry, compared to the initial years of the Republic, showed little improvement in productivity, and the later years of the decade saw stagnation. However livestock products, including meat, milk, wool, and eggs, contributed to more than ⅓ of the value of agricultural output.

Industrial sector

The largest industry - and largest exporter - is textiles and clothing, which is almost entirely in private hands, next to petroleum refineries (Izmir, Istanbul, Adana, and Kayseri), Iron and Steel Mill at Karabuk and Eregli Iron and Steel works. Also, brick, tile, glass, leather, chemicals and pharmaceuticals, white goods, metalworking, cordage, flour milling, vegetable oil, sugar beet, paper, plastic production and rubber processing are counted amongst important branches of industry.

The automotive industry, which is the seventh largest in Europe, is also an important part of the economy, since 1970s. Most of the production of machines, consumer goods, and tools take place in hundreds of small machine shops. Large factories of international firms such as Mercedes, Fiat, and Toyota are providing jobs for thousands of people.

Service sector

The road network was an estimated 382,397 km in 1999, including 95,599 km of paved roads and 1,749 km of motorways. The rail network was 8,682 km in 1999, including 2,133 km of electrified track. There are 1,200 km of navigable waterways. There were 118 airports in 1999, including six international airports in Istanbul, Ankara, Izmir, Trabzon, Dalaman and Antalya.

Telecommunications were liberalised in 2004 after the creation of the Telecommunication Authority. Private sector companies operate in mobile telephony and Internet access. There were 19 million fixed phone lines, 36 million mobile phones, and 12 million Internet users by the August, 2005.

Tourism sector

Tourism is one of the most dynamic and fast developing sectors in Turkey. According to the travel agencies TUI AG and Thomas Cook, 31 hotels out of 100 best hotels of the world are located in Turkey.

In the year 2005, 21,122,798 tourists vacationed in Turkey. The total revenue was $18.2 billion and with an average expenditure of $679 per tourist. Over the years, Turkey has emerged as a popular tourist destination for many Europeans, often competing with Greece, Italy and Spain. Turkish destinations such as Antalya and Muğla (sometimes called the Turkish Riviera) have become very popular among European tourists.

Financial sector

 The currency of Turkey is the New Turkish Lira (Yeni Türk Lirası or YTL for short)

The Central Bank of the Republic of Turkey (Türkiye Cumhuriyet Merkez Bankası) was founded in 1930, as a privileged joint-stock company. It possesses the sole right to issue notes. It also has the obligation to provide for the monetary requirements of the state agricultural and commercial enterprises. All foreign exchange transfers are exclusively handled by the central bank. The bank has 25 domestic branches, as well as branches in New York, London, Frankfurt, and Zurich.

In 1998 there were 72 banks. In late 2000 and early 2001 a growing trade deficit and weaknesses in the banking sector plunged the economy into crisis. There was a recession followed by the floating of the lira. This financial breakdown brought the number of banks to 31. Currently more then 34% of the assets are concentrated in the Agricultural Bank (Ziraat Bankasi), Housing Bank (Yapi Kredi Bankasi), IsBank and Akbank. There are also Middle Eastern Trading Banks, which practice an Islamic type of trading. The five big state-owned banks restructured during 2001. Political involvement was minimized and loaning policies were changed. However, over-staffing remains a problem.

The Istanbul Stock Exchange opened in 1985 and Istanbul Gold Exchange in 1995.

Government regulations passed in 1929 required all insurance companies to reinsure 30% of each policy with National Reinsurance Corp. In 1954, life insurance was exempted from this requirement. The insurance market is officially regulated through the Ministery of Commerce.

After years of low levels of foreign direct investment (FDI), in 2005 Turkey succeeded in attracting $9.6 billion in FDI and is expected to attract a similar level in 2006. A series of large privatizations, the stability fostered by the start of Turkey’s EU accession negotiations, strong and stable growth, and structural changes in the banking, retail, and telecommunications sectors have all contributed to the rise in foreign investment. Turkey has taken steps to improve its investment climate through administrative streamlining, an end to foreign investment screening, and strengthened intellectual property legislation. However, a number of disputes involving foreign investors in Turkey and certain policies, such as high taxation of cola products and continuing gaps in the intellectual property regime, inhibit investment. Turkey has a number of bilateral investment and tax treaties, including with the United States, that guarantee free repatriation of capital in convertible currencies and eliminate double taxation.

In recent years the economic situation has been marked by erratic economic growth and serious imbalances. Real GNP growth has exceeded 6% in many years, but this strong expansion has been interrupted by sharp declines in output in 1994, 1999, and 2001. Meanwhile the public sector fiscal deficit has regularly exceeded 10% of GDP - due in large part to the huge burden of interest payments, which in 2001 accounted for more than 50% of central government spending - while inflation has remained in the high double digit range. Since 2003, the inflation has lowered to single digits, and the economy is showing an average growth of 6.2%, between 2003-2005. Fiscal deficit is benefiting (though in small amount) from large industry privatizations.

For a time, the lira was synonymous with an low-valued currency. Recently, the "New Turkish lira" was introduced, worth 1 million old lira. (In essence, they "slashed off some zeroes".) This was meant to be a symbol of a stronger currency, after a long period of high inflation that had devalued the currency so greatly.

Natural resources

Turkey is an oil producer, but the level of production isn't enough to make the country self sufficient. As a result, it is a net oil and gas importer.

The pipeline network in Turkey included 1,738 km for crude oil, 2,321 km for petroleum products, and 708 km for natural gas in 1999. Several major new pipelines are planned, especially the Baku-Tbilisi-Ceyhan pipeline for Caspian oilfields, the longest one in the world, which recently opened in 2005.

According to the CIA World Factbook, other natural resources include coal, iron ore, copper, chromium, uranium, antimony, mercury, gold, barite, borate, celestite (strontium), emery, feldspar, limestone, magnesite, marble, perlite, pumice, pyrites (sulfur), clay, arable land, hydropower.

The ore borax, from which boron is extracted is very abundant in Turkey. Turkey along with the United States, is one of the world's largest producers of boron. Turkey has the world's largest osmium reserves with an estimated 127,000 tonnes, which is far above second placed Bulgaria whose reserves are only an estimated 2,500 tonnes.

Energy

To cover the increasing energy needs of its population and ensure the continued raising of its living standard, Turkey plans several nuclear power plants. Nuclear power proposals were presented as early as in the 1960s, but plans were repeatedly canceled even after bids were made by interested manufacturers because of high costs and safety concerns. Turkey has always chosen Candu nuclear reactors because they burn natural uranium which is cheap and available locally and because they can be refueled online. This has caused uneasy feelings to Turkey's neighbors because the complexity of such reactors makes them less safe and because they are suitable for producing weapons grade plutonium.

Labor

Turkey's workforce is flexible, with a wide spectrum of skills from the unskilled to highly qualified. Turkey is obliged to apply EU (European Union) employment and social laws to qualify for membership.

Environment

With the establishment of the Turkish Environment Ministry in 1991, Turkey began to make significant progress addressing some of its most pressing environmental problems. The most dramatic improvements were significant reductions of air pollution in Istanbul and Ankara. The most pressing needs are for water treatment plants, wastewater treatment facilities, solid waste management and conservation of biodiversity. On average, the environmental performance of private corporations is much better than the large number of state owned enterprises.

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