Turkey’s booming economy is spilling over into the local film industry, boosting budgets and exports.

Still, Turkey’s film sector has plenty of room for improvement, especially compared with its terrific TV trade.

With the country in turbo mode, Turkish film and TV producers over the past decade have been tapping into more coin, from both private investors and government subsidies, which are regulated by a 2004 law. This law is being modified to provide more incentives, including breaks for foreign productions, which get a refund of the country’s 18% VAT tax when they shoot in Turkey.

What’s driving the Turkish film industry is the strong and stable local market share.

Homegrown fare in 2012, the most recent year for which figures are available, accounted for a whopping 46.6% of the total box office.

The Turkish box office champ in 2012 was turbans-and-testosterone epic “Fetih 1453,” helmed by Faruk Aksoy, about the capture of Constantinople in the 15th century by the Ottoman Turks, toplining local hunk Ibrahim Celikkol as a heroic Turkish martyr.

Produced by Aksoy Film Prods., “Fetih” pulled $31 million, more than 10% of the nation’s $234 million total box office last year, and has traveled widely.

But Abdurrahman Celik, an adviser to the Turkish culture ministry, cautions that only five Turkish pics last year reached 1 million admissions at the local box office, considered the benchmark for a successful pic.

This year, “The Butterfly’s Dream,” which is directed by poet, playwright, and actor Yilmaz Erdogan, has scored $10 million-plus domestically, which is especially impressive considering it’s a much more delicate narrative than “Fetih.” Budgeted at $15 million and already exported quite widely, “Dream” is a World War II-set romancer about two young poets forced to work in a coal mine and who fall in love with the same young woman from a wealthy family.

The film is also Turkey’s entry into the foreign-language film Oscar race.

FilmNation sales exececutive Tara Erer, who is Turkish, notes that there are two main genres of films that are made in the country: drama and comedy, both of which are “very culture and language-specific,” which makes it more difficult for them to travel.

A notable exception is director Mahsun Kirmizigul’s Hollywood-style auctioner “Five Minarets in New York” (aka “Act of Vengeance”) with Danny Glover and Gina Gershon, about two Turkish agents sent to New York City to capture a notorious terrorist. The 2010 pic, reportedly budgeted at $20 million, pulled in more than $40 million, about half from domestic auds and the rest internationally, including the U.S.

Germany, which has a large Turkish population, is the main territory for the exports, and also the country with which Turkey has the closest cinematic ties creatively.

According to distributor Pamir Demirtas, whose Pinema mainly brings Hollywood product to Turkey but would love to see local exports rise, luring more foreign productions “could encourage local producers and investors to think bigger.”

The government is also paying attention, as Celik assures “we are planning to give direct support to foreign productions soon.”

Still, the current lack of incentives has not prevented several high-profile Hollywood pics, including “Argo,” “Taken 2” and “Skyfall,” from shooting in Turkey. Expected next on Turkish shores is Russell Crowe’s directorial debut, “The Water Diviner.”