Turkey’s Economic Resilience Offers a Roadmap for Pakistan’s Industrial Transformation

An ADB-led study finds that Turkey’s ability to sustain growth despite inflation exceeding 70% stems from its strong industrial base, diversified exports, high productivity, and greater fiscal capacity. In contrast, Pakistan’s weaker industrial structure, narrow export base, and low productivity make it far more vulnerable to inflation, highlighting the need for industrial upgrading, export diversification, and infrastructure investment to build long-term economic resilience.

A new study by the Asian Development Bank (ADB), prepared with the Central Asia Regional Economic Cooperation Institute and the Sustainable Development Policy Institute, argues that inflation alone does not determine a country's economic performance. Comparing Pakistan and Turkey, the report finds that industrial capability, productivity, exports, and fiscal strength are the real factors that decide whether an economy can withstand economic shocks and continue growing.

Why Turkey Handles High Inflation Better

Turkey has experienced some of the highest inflation rates among emerging economies, with consumer inflation reaching 72.3% in 2022 and remaining above 50% during 2023–2024. Despite this, the Turkish economy maintained strong growth, averaging 6.4% between 2021 and 2024.

Pakistan, in contrast, faced much lower inflation for most of the past decade but suffered severe economic stress when inflation peaked at 30.7% in 2023. Growth fell sharply and the country faced foreign exchange shortages and balance-of-payments pressures.

According to the report, the difference lies in economic structure. Turkey has a diversified industrial base with strong automotive, machinery, and manufacturing sectors, while Pakistan remains heavily dependent on textiles, leather products, food processing, and other low-value industries.

Exports and Industry Drive Economic Resilience

One of the report's strongest findings is that export strength determines how countries respond to economic shocks. Turkey's exports account for around 19–27% of GDP, compared with only about 10% in Pakistan. Turkish industries are integrated into global value chains and can benefit when the currency depreciates because exports become more competitive.

Pakistan's export sector is much narrower and less diversified. As a result, currency depreciation mainly increases the cost of imports and fuels inflation without generating a major increase in exports. Pakistan's share of global exports has remained stuck at about 0.2% for decades.

The report also notes that Turkey attracts significantly higher foreign direct investment. Annual FDI inflows have ranged between $10 billion and $19 billion in recent years, while Pakistan has generally received only $2.5 billion to $4 billion. Higher investment has helped Turkey improve technology, productivity, and industrial competitiveness.

Productivity and Infrastructure Make the Difference

Industrial productivity is another major area of divergence. By 2024, industrial value added per worker in Turkey reached nearly $39,000, compared with around $5,300 in Pakistan. This seven-fold productivity gap reflects stronger technology adoption, better management, more reliable infrastructure, and a more skilled workforce.

Turkey also benefits from world-class logistics and transport networks. It ranked 17th globally on the liner shipping connectivity index in 2024, compared with Pakistan's 34th position. Better ports, railways, roads, and supply chains allow Turkish businesses to reach regional and international markets efficiently and at lower cost.

For Pakistan, weak logistics and infrastructure continue to raise business costs and limit export growth despite the country's strategic geographic location.

Key Lessons for Policymakers and Development Partners

The study suggests that governments should focus less on short-term inflation management and more on building productive capacity. Exchange-rate depreciation alone cannot improve exports unless strong industries already exist. Similarly, remittances can help stabilize foreign exchange reserves but cannot replace export-led growth.

For development partners, the findings highlight the importance of supporting industrial upgrading, trade facilitation, logistics infrastructure, skills development, and technology adoption. Programmes focused solely on macroeconomic stabilization are unlikely to deliver lasting results without structural reforms.

The report also points to the need for stronger fiscal capacity. Turkey collects tax revenues equal to 17–18% of GDP, nearly double Pakistan's 9–10%, giving it greater room to invest in infrastructure, industry, and social development.

Opportunities and the Road Ahead

For private-sector investors, the report identifies opportunities in manufacturing modernization, logistics, renewable energy, digital technologies, export industries, and supply-chain development. However, it warns that policy uncertainty, high energy costs, weak infrastructure, and limited access to finance remain significant risks, particularly in Pakistan.

The report concludes that economic resilience is built over decades through investment in industry, productivity, infrastructure, and institutions. Countries with diversified exports, competitive industries, and strong fiscal systems can absorb inflationary pressures more effectively than those relying on consumption, remittances, or narrow export bases.

The central message for policymakers is clear: sustainable growth is not determined by inflation rates alone. It depends on a country's ability to produce, compete, innovate, and integrate into global markets. Building industrial capability today will determine economic resilience tomorrow.