According to 2025 data, Turkey nearly broke free from the group of countries stuck in the “middle-income trap.” This term describes economies whose average GDP per capita does not exceed 20% of that figure for the United States. However, the range of income levels among these countries is quite wide: from $1,100 to $15,000 per person.

Last year, GDP per Turk stood at $18,600. This is almost as much as in the poorest EU countries, such as Bulgaria and Romania; by comparison, in Ukraine, this figure was $6,500 per person.

However, Turkey has a unique economic characteristic: the difference between gross domestic product and gross national income is very large. Let’s not get bogged down in formulas. Put simply, it looks like this: GDP is everything produced within the country, including by foreign governments, companies, and citizens. GNI is what national companies, the government, and citizens earn both within the country and abroad. In many countries, these indicators, if not identical, are very similar. There are exceptions — wealthy countries like Norway, Switzerland, or Qatar, where GNI is higher than GDP because they earn income not only from their own production and services but also by investing large surpluses of capital in other economies. Turkey, on the other hand, is the exact opposite: its GDP is inflated by foreign capital, so if we look at gross national income per capita, it amounts to just over 13,000 per year per Turk. This is precisely what keeps the country trapped in the aforementioned “middle-income trap.”

For a long time, at the macro level, Turkey has been balancing between two models of behavior to sustain economic growth:

1. A budget deficit, where expenditures exceed revenues, domestic debt increases, and inflation rises, leading to a decline in imports and stimulating artificially inflated domestic consumption
2. A balance of payments deficit, where the country is forced to increase imports of energy resources, technology, and equipment to develop production. Imports begin to far exceed exports. Pressure builds on the lira, causing it to devalue sharply, but this temporarily boosts exports.

These two models had to be alternated. Sometimes, both had to be used simultaneously. Debt problems were resolved through the bankruptcies of large debtors and the restructuring of public debt, which was covered by privatization or by printing money. That is precisely why the Turkish lira, except for a brief period in the 2000s, has been rapidly depreciating for 60 years.

The problem is that the country has been unable to address its balance of payments deficit for decades, except perhaps in the 1970s when imports were almost completely banned, leading to a shortage of goods and the proliferation of the black market. Turkey has long been advised on how to implement tight monetary policy, maintain fiscal discipline, and raise the population’s level of education and, consequently, labor productivity. All of this is economic theory; however, except for Poland, South Korea, and perhaps Singapore, the world knows of no examples of middle-income countries breaking into the upper echelon of wealthy nations. More than 100 countries around the world remain among those that are constantly trying to catch up but cannot catch up with the wealthy nations.

Turkey is trapped in the middle-income trap due to a lack of free access to the markets of other economies. This makes it a country where growth is extensive: more tomatoes, textiles, and tourism mean more money. For intensive growth, it lacks scarce raw materials, breakthrough technologies, or unique offerings: until recently, it had no high-tech or rare goods that the world would line up for — such as Taiwanese chips, Russian oil, Chinese rare-earth metals, or American military technologies.

Turkey’s customs union with the EU has significant restrictions and has long been outdated. Agricultural products and tourism are not part of the agreement, and e-commerce was not a relevant issue in 1996, so this important sector of the economy is not addressed in the customs union. During Erdogan’s early years in office, Turkey began expanding into the markets of the Muslim world, primarily the wealthy Gulf states. However, trade with these countries always carries non-economic risks. Just a few instances of misunderstandings with Egypt, Saudi Arabia, or the UAE have shown how monarchies or autocracies can block trade relations with a single decree.

Even while serving as prime minister in the early 2010s — and especially after the protests in Gezi Park — Erdogan realized that economic competition from all sides made it clear: no one in Europe or the Middle East wanted a powerful Turkey. All the spots in the hierarchy of the powerful and influential have already been taken. The attempt to catch up technologically alongside Russia did not work out. Tomatoes may quickly be deemed harmful, but gas and oil prices are set monopolistically by Moscow. Military purchases of C-400 systems did not grant access to the technology itself, and the construction of nuclear power plants has been accompanied by surprises and a dismissive attitude on the part of the Russians toward their Turkish partners.

An understanding of Turkey’s existential isolation has forced Erdogan to reassess its relations with everyone around it and, in effect, to abandon European integration: there will be no place for Turkey in Europe, even if it meets and exceeds all the Maastricht and Copenhagen criteria. This is not about some emotional gestures. The new model bears some resemblance to Kuchma’s “multi-vector” policy, but it would be more accurate to describe it as “multi-transactional.”

Future relations with supranational structures and bilateral ties with other countries are governed by the following formula: what efforts this will require of Turkey and what benefits it will gain in the long run. Turkish aid in Libya or Somalia is not a manifestation of Erdogan’s altruism toward the poor and unfortunate. Ankara is playing the Islamic card, which serves as an ideological smokescreen, by helping poor Muslim countries in Asia and Africa whose strategic location will make Turkey a global player. The Turks are essentially imitating the Chinese on a shoestring budget: they have less money, but it’s “halal” — unlike the funds of former European imperialists or future Chinese ones.

Erdogan’s second focus is the Turkic world, whose unification was a dream even of the country’s eighth president, Turgut Özal. However, he died in 1993, when all the newly independent Turkic-speaking countries were under Moscow’s control, and China subsequently began to gain a foothold there. The first step in this direction is participation in a military resolution of the Nagorno-Karabakh conflict and Armenia’s subsequent willingness to normalize relations with Baku and Ankara. It is the Armenian region of Zangezur that Turkey needs to secure a direct land corridor to the main part of Azerbaijan. And beyond that lies access to Turkestan, as Turkey now officially refers to the countries of Central Asia.

The Caspian Sea, to which Kazakhstan, Turkmenistan, and Azerbaijan have access, will connect Turkey to the rest of the Turkic world. Here, Ankara needs non-hostile behavior from Iran and Russia, which control the Caspian Sea from the south and north, respectively.

Erdogan’s third direction of economic expansion partially overlaps with the first and second, but it deserves to be highlighted separately: neighbors that were once part of the Ottoman Empire. These include Georgia and North Macedonia, Hungary, and Syria. People from these countries often choose Turkey as a destination for immigration, and soft power in the form of Turkish content has made local consumers nationwide dependent on Turkish films, TV series, and actors — all of which are fully competitive with Hollywood and Netflix. Incidentally, content exports surpassed the $1 billion mark for the first time in 2025. Turkey joined the top four exporters of TV series, trailing only the U.S., the U.K., and South Korea.

Having gained fame through the Bayraktar drones — well-known to Ukrainians — Erdogan has focused on exporting military equipment, and the brands Havelsan, Aselsan, and Roketsan have expanded beyond the country’s borders. So far, revenue from these exports amounts to just over $10 billion. Compared to Turkey’s total revenue of 273 billion, this may seem like a small amount, but these products account for the 4% of Turkish exports classified as “high-tech goods.”

And finally, Turkey is transforming the entire country into a “New Dubai.” Starting this year, all income earned by new residents from operations outside Turkey will be taxed at a rate of 1% or 0%. The condition for new residents is to keep this money in Turkey. This tax haven is set to last for 20 years, and the inheritance tax for these wealthy individuals will also be 1%, all to attract the descendants of these moneybags to the country. Against the backdrop of the vulnerable Gulf states and a half-dead Europe, Turkey promises security and long-term tax stability, and to guarantee this long-term perk, the current government must ensure policy continuity. Almost like the absolute monarchies of the Arabian Peninsula: with strict Islam for the general population and oases of liberal freedom for tens of thousands of wealthy individuals.