ANKARA
Despite wars in neighboring countries, crises, terrorist attacks, disasters, and coups, Türkiye has emerged as one of the world’s largest economies. This remarkable feat is attributed to strategic measures taken throughout its century-long history as a republic, and the country is now embarking on the new century with ambitious objectives.
Even before the Republic of Türkiye was proclaimed on Oct. 29, 1923, its Aegean city of Izmir hosted an economic congress just months after it was liberated from the occupying Greek army in the Turkish War of Independence.
Mustafa Kemal Ataturk, who led that war and went on to become Türkiye’s founding father, underlined the crucial role of economic success in maintaining the gains made by establishing the new country.
“Political and military victories, no matter how great they may be, cannot be sustained if they are not supported by economic victories, they will soon fade away,” he said at the two-week Izmir Economic Congress, beginning on Feb. 17, 1923, with participants from all over the nation.
The republic’s founding, with Ataturk as its first president, ushered in a new era for the Turkish economy.
In its first years, the country espoused an economic model in which the state and private sector contributed to production together.
Factories soon arise across numerous industries, from defense to food, textiles, mining, and cement, despite the human and financial costs of the War of Independence and World War I less than a decade ago.
Türkiye’s first aircraft factory, TOMTAS, began operation in 1926, the third year of the republic.
Then came the Great Depression of 1929, which triggered deep reverberations across the global economy, also affecting Türkiye in its wake.
The currency crisis in this period led officials to expedite the process of establishing the Central Bank of the Republic of Türkiye (CBRT), with the bank opening its doors on Oct. 3, 1931.
While the early stages of the crisis saw agriculture come to the forefront through land reform, government intervention in the following years sought to instigate a shift towards industry.
In 1932 and 1936, the country prepared its first and second five-year industrialization plans, prioritizing basic industries like iron-steel, coal, and machinery.
Investments in railways were also high on the agenda to help get the goods that were products to all corners of the country at affordable cost. In 1923-1950, a total of 3,780 kilometers (about 2,350 miles) of railroad was laid, adding to the existing 3,714 km inherited from the pre-republican period.
The Great Depression was also among the top causes of World War II, which began in 1939 and dragged on until 1945.
While Türkiye remained neutral for most of the war, it could not escape its effects as foreign trade was disrupted and production declined.
Domestic projects
The post-war era saw the US’ initiation of the Marshall Plan as it sought to reduce the effects of the economic crisis in the world.
One of the 16 countries to benefit from the aid was Türkiye, where it directed investments mostly to agriculture and light industries, while sparking a prolonged debate on growing foreign dependency.
Some factories also shuttered their doors as industrial investments dwindled. Among these was the aircraft factory that had been inaugurated in 1926.
Following that venture was another significant milestone marked the production of the “Devrim” automobile.
Remarkably, the project was accomplished within a mere 129 days, defying the prevailing skepticism about Türkiye’s ability to manufacture its own automobile.
On the morning of Oct. 29, 1961, the very first Devrim car was brought to the Turkish parliament and presented to then-President Cemal Gursel.
The economy, as well as the democratic landscape, were also by military coups and interventions in 1960, 1971, and 1980.
Structural economic problems emerged in the country in the 1970s as a result of a confluence of challenges, including those related to Türkiye’s policy of import substitution, as well as the world oil crisis, Cyprus Peace Operation, and a US embargo over liberalization of poppy cultivation.
The US decision to impose an arms embargo against Türkiye following the 1974 Cyprus Peace Operation laid bare the country’s foreign dependence in the defense industry.
Within this period, the groundwork for domestic and national defense production was established.
In 1975, Aselsan was founded as a publicly owned defense industry firm, now a giant in the country active in a host of areas. It was followed in the ensuing years by other companies like Havelsan and Roketsan.
Even as efforts to modernize and industrialize agriculture pressed forward during these years, certain factories, roads, and dams were completed, despite the challenging economic conditions.
Flexible currency regime
On Jan. 24, 1980, a set of “Economic Stability Decisions” was unveiled with the aim of addressing the economic issues plaguing the nation. These decisions, often referred to as the Jan. 24 Decisions, marked a pivotal shift in policy.
These decisions brought one of the most significant turning points in the country’s economic history over the past century. The industrialization system underwent a transformation, giving rise to an export-oriented, open economy policy.
This transition was accompanied by the initiation of financial liberalization, which laid the foundation for the Central Bank to carry out monetary and exchange rate policies in alignment with the principles of a market economy.
Under the purview of the monetary policy, deposit and loan interest rates were determined based on market conditions. The Turkish currency experienced devaluation against foreign currencies as the fixed exchange rate regime was replaced with a more flexible one.
During this period, a multitude of initiatives were launched, including the Southeastern Anatolia Project, while motorway construction sped up and various infrastructure projects were completed, like airports and bridges, notably the first one to span the Istanbul Strait in 1973 and connect the continents of Europe and Asia.
Despite these positive developments, mounting domestic debt, increasing interest payments, public expenditures surpassing 11%, and stagnant exports prompted the announcement of a comprehensive package of economic measures on April 5, 1994.
This package included various measures, such as limiting civil servant and labor payments to budget allocations and halting the recruitment of public personnel. Nevertheless, the value of the US dollar soared, several banks faced insolvency, and unemployment rates climbed. The economy contracted by 5.5% during this period, leading to downsizing and bankruptcies among numerous firms.
In May 1994, Türkiye entered into a new 14-month standby agreement with the International Monetary Fund (IMF). Over these years, a significant portion of resources was diverted towards counter-terrorism efforts rather than economic investments.
In the midst of these developments, Türkiye achieved noteworthy milestones, including the launch of its first satellite, Turksat 1B, into space, the establishment of its first mobile phone operator, and an increased focus on regional development plans. Privatization practices also gained prominence during this era.
The economic crisis of 1994, as well as economic developments in Asia, the devastating 1999 Marmara earthquake, and heightened financial market tensions ultimately triggered another crisis in 2001.
After a political spat between the country’s president and prime minister during a meeting of the country’s National Security Council was publicized, the Borsa Istanbul stock exchange fell sharply and overnight interest rates soared to over 7,000.
In response to these challenging circumstances, Kemal Dervis, then the vice-president for poverty reduction and economic management at the World Bank, was invited back to Türkiye by then-Prime Minister Bulent Ecevit.
Dervis assumed the role of the Minister of State in charge of the economy and announced a new economic program while conducting negotiations with the IMF. He worked to instill confidence in the markets by enacting the envisaged legal changes.
Post 2002 era
When the Justice and Development (AK) Party became the ruling party in 2002, the aim was to stabilize the economy as well as politics.
Structural reforms, fiscal discipline and tight monetary policy implemented by the AK Party governments led to an improvement in basic macroeconomic indicators.
As a result of these favorable developments, the amount of foreign investment increased as the confidence of international investors increased.
It was decided to remove six zeros from the currency in order to restore the reputation of the Turkish lira, which had lost value due to high inflation in the past.
In 2008, the global economy experienced one of the deepest crises since the Depression of 1929.
The “Mortgage Crisis,” which started in the US, affected the whole world; the process led to the bankruptcy of large companies, the collapse of banks and the unemployment of millions of people.
Türkiye, on the other hand, was among the countries least affected by this crisis.
One of the issues that marked Türkiye’s 100-year economic history was its relations with the IMF.
Türkiye became a member of the IMF, which was established in 1944 in 1947.
For the first time in 1958, a program prepared by the IMF was put into effect in order to obtain foreign debt.
The first Stand-By Agreement between the IMF and Türkiye was signed on Jan. 1, 1961.
During the prime minister era of President Recep Tayyip Erdogan, it was decided not to make a new agreement with the IMF, with which 19 Stand-By Agreements had been made previously.
Türkiye paid the last installment in May 2013 and ended its debt to the IMF.
Under Erdogan’s leadership, domestic and national technologies were supported in many fields, from defense to energy, from transport to IT. The steps taken in strategic areas were aimed at reducing the external dependence of the Turkish economy.
During this period, various projects in the defense industry, including unmanned aerial vehicles, national combat aircraft, ships and tanks, were rapidly advanced, while high-speed train and metro projects were conducted.
During this period, events such as the Gezi Park in 2013 and the treacherous coup attempt of the terrorist group FETO on July 15, 2016, also affected the Turkish economy.
While the economy grew by 6.1% at constant prices in 2015, this rate declined to 3.3% after the coup attempt.
Quickly recovering from these wounds, Türkiye grew by 7.5% in 2017.
The COVID-19 pandemic, which started at the end of 2019 and its impact felt in Türkiye from 2020 onwards, led to a sudden change in the supply and demand balance, disruption of the supply chain and increased costs.
As in global markets, there was a contraction in the Turkish economy. Many monetary and fiscal measures were announced to mitigate the effects of the pandemic.
The Russia-Ukraine War, which started before the wounds of the pandemic were healed, also opened the doors to a new crisis in the global economy.
Food, gold, energy and oil prices increased. Although the effects of the war were mitigated by the grain corridor created by the initiative of President Recep Tayyip Erdogan and the UN, the world faced various problems, especially high inflation.
Mega projects
The most recent earthquakes, centered in Kahramanmaras this February, caused devastation in 12 provinces and created a huge bill in the country’s economy.
Despite all these developments, Türkiye has implemented many domestic and national projects, including the domestic electric vehicle Togg, and made many investments from motorways to bridges, dams to factories.
Istanbul Airport, which is among the world’s largest projects, the 1915 Canakkale and Yavuz Sultan Selim bridges and dams, including Yusufeli and Deriner, were just a few of the projects completed in this process.
While focusing on domestic and national studies in energy, the construction of the nuclear power plant in Akkuyu accelerated, and studies on the extraction of energy resources, especially in the Mediterranean and Black Sea, intensified.
The use of technology in agriculture increased, while the capacity for communication was increased with satellites. Türkiye reached the point of producing its own national satellites.
Trade has recently broken records in the history of the Republic.
GDP
On the 100th anniversary of the Republic, the Turkish economy is the 17th largest in the world.
According to the medium-term program, employment is expected to reach 31.65 million by the end of this year.
GDP is projected to be 25.48 trillion Turkish Liras (903.9 billion) at current prices, and national income per capita is expected to be $12,415.
In Türkiye’s second century, domestic and national production targets stand out in every field, from defense to railways, from industry to agriculture.
A roadmap is being drawn to extend the breakthrough in the defense industry.
Raising the country’s place among the top economies in the world is among Türkiye’s targets.
