Economic expansion slowed to 2.2% in 2012, heralding an end to the China-level growth levels that had seen the economy expand by 9.2% in 2010 and 8.8% in 2011.

Economic expansion slowed to 2.2% in 2012, heralding an end to the China-level growth levels that had seen the economy expand by 9.2% in 2010 and 8.8% in 2011. Growth accelerated by 3% in 1Q2013, although perhaps not enough to reach the government target of 4% for the year. Nominal GDP per capita continued to rise, up to $10,504 from $3,492, when the ruling AK Party took power. The year saw a sharp drop in the current account deficit (CAD), down 38.6% to $47.5 billion, or 6% of GDP. FDI also slowed over the year, down 23% year on year to $12.4 billion in 2012. Manufacturing was the largest FDI recipient for the year, attracting $4.3 billion. The automotive sector is the star of the country's manufacturing industry, despite a drop in production of 9.8% in 2012 due to weakened export markets and falling domestic demand—the domestic purchase of passenger cars fell by 10% to 817,620 units. The slowdown has not deterred automakers, however, with investments worth TL5 billion announced over the year, including plans from Ford, Hyundai, Toyota, Fiat, and Renault to expand capacity.

Turkey also made headlines around the world in June 2013 as a result of nationwide demonstrations, stemming from the harsh police handling of civilians protesting the re-development of Istanbul's Gezi Park. The retail sector stagnated over that month, on the back of 10% growth in May and despite the annual Istanbul Shopping Fest, which had attracted 1 million additional tourists to the city in previous years. The tourism sector recorded lost revenues of €55 million, due to cancelled overnight reservations, and in the medium-term the events could impact the government's target of $20 billion in FDI by end-2013, although slow growth in the US could be the more likely culprit.

Tourism statistics from the first five months of 2013 suggest 10.5 million people visited the country, an 18.5% increase from the year before. In a boon to the hospitality sector, European tourists accounted for 51% of the total figure, suggesting recovery in the market. The number of tourists arriving in 2012 was 36.7 million, while per capita tourist spending was $798.

The last several months have been a good year for Turkish sports, as the country's cultural capital Istanbul goes head to head with Tokyo and Madrid to host the 2020 Summer Olympic Games. In June-July, the country hosted the FIFA U-20 World Cup, while in the same year the Mediterranean Games were held in Mersin, in the south of Turkey.

As the country moved into 2013, domestic demand began to show signs of recovery based on inflation of 8.3% in June, above the yearly Central Bank of Turkey (CBT) target of 5%. The import of consumer goods also rose 13.3%, adding to concerns that demand is indeed on the rise. While this has come as bad news to the CBT, which has looked to curb demand by promoting savings and slowing loan growth to reduce imports and reduce dependence on foreign capital, it is likely good news for manufacturers, which both rely on Turkey's broad export market as well as its large domestic market for sales. Industrial production grew to a nine-month high in February 2013 at 4.4%, while April figures saw an increase of 3.4%. Manufacturing led growth for the month, expanding at 3.6%, expanding again by 2.5% in May, while industrial production growth overall slowed to 2%, below consensus estimates.

Other areas of the economy on an upward trend over 2013 include transport and construction, with the development of several megaprojects in line with the government's Vision 2023. Turkey's transportation network is currently undergoing an overhaul, with $30 billion committed to Turkish State Railways (TCDD) alone to improve the country's ailing rail network, add high-speed lines, and improve inter-city transit. Work on Istanbul's third Bosphorus bridge also began in May 2013, and will form part of the Northern Marmara Motorway, which will travel along the country's northern coast and bypass urban areas of Istanbul. Other major projects include the long-delayed Marmaray, set to open in October 2013 and provide a rail link between the European and Asian sides of Istanbul under the Bosphorus, the Istanbul-Izmir Highway, which will feature the world's second-longest suspension bridge across the Gulf of Izmit, and Kanal Istanbul, a canal project that will provide a second link, after the Bosphorus, between the Sea of Marmara and the Black Sea.

Vision 2023 targets a GDP of $2 trillion, exports of $500 billion, and nominal GDP per capita of $25,000. It is in this context that the government will continue to push growth into 4Q2013 and beyond. All eyes will be on Turkey again in October 2013, as EU accession negotiations are set to resume on Chapter 22. The country's evolving relationship with the bloc, Turkey's largest trading partner, will continue to play a key role as the Republic moves toward its centenary in 2023.