Turkey’s Potential for Increased FDI: Projections and Current Trends

Turkey could significantly boost its foreign direct investment (FDI) inflows if it aligns its risk indicators and regulatory framework with those of its competitors, according to YASED’s FDI Competitiveness Index. YASED’s projections suggest that such alignment could place Turkey among the top 10.

According to YASED’s FDI Competitiveness Index, Turkey could see a substantial increase in foreign direct investment (FDI) inflows by improving its risk indicators and regulatory framework to match those of its competitors. YASED’s projections indicate that such improvements could elevate Turkey to a top 10 position in the index.

YASED Chairman Ayşem Sargın Aksoy highlighted that with these changes, annual FDI inflows into Turkey could potentially rise from the current $13 billion to between $25 billion and $30 billion. Aksoy emphasized that Turkey is now competing not only with developing nations but also with developed economies like Germany for foreign investments.

Turkey’s advantages include its strong position in “friendshoring,” which involves investing in allied nations. Aksoy pointed out several selling points: a per capita GDP above $10,000, a young and large working population, and a strategically convenient geographical location.

Results from YASED’s Pulse CEO survey revealed that international companies are looking to expand their operations in Turkey. Exchange rates and inflation were identified as the main issues affecting these companies, though recent improvements have been noted. In the December 2023 survey, 88% of CEOs cited exchange rate volatility as a significant risk, which decreased to 82% in the subsequent survey conducted between May 17 and July 9. Similarly, the perception of inflation as a risk declined from 86% to 81%.

Despite existing risks, Aksoy noted a cautious optimism towards Turkey. The FDI inflows into Turkey for the first five months of 2024 amounted to $3.8 billion, reflecting a 15% decrease compared to the same period last year. Since 2002, Turkey has received over $267 billion in FDI inflows, according to YASED’s report based on Central Bank data.

In summary, with strategic improvements in risk management and regulatory practices, Turkey has the potential to significantly enhance its attractiveness to foreign investors, leveraging its economic strengths and strategic location.

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