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Aberdeen sunum v7   02.09.2013
Aberdeen sunum v7   02.09.2013
Aberdeen sunum v7   02.09.2013
Aberdeen sunum v7   02.09.2013
Aberdeen sunum v7   02.09.2013
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Aberdeen sunum v7   02.09.2013
Aberdeen sunum v7   02.09.2013
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Aberdeen sunum v7 02.09.2013

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  • 1.1 bn TL spent on Syrian refugees since May-11.
  • State contribution up to 25% of the annual gross minimum wage. 3 years  15%6 years  35%10 years  60%Retirement  100% of the 25% State ContributionParticipants:28.12.2012: 3.119.03309.08.2013: 3.772.223
  • Transcript

    • 1. Outlook for Turkish Economy Istanbul, Sept. 2, 2013 Mehmet Şimşek Minister of Finance 1
    • 2. Outline Turkey’s Response to Recent Financial Turmoil Economic Outlook Current Account: A Soft Spot Reform Agenda Turkey’s Long-Term Prospects 2
    • 3. Turkey’s Response to Recent Financial Turmoil 3
    • 4. Turkey’s Response: Macroeconomic Policies Maintaining fiscal discipline Tighter monetary policy Flexible exchange rate, daily FX auctions Reserve policies, ROM & ROC mechanisms 4
    • 5. Turkey’s Response: Macro Prudential Policies Continuous banking sector stress tests since 2004 A 12% target Capital Adequacy Ratio since 2006 A ban on Household FX borrowing since 2009 LTV ratio of 75% on mortgages since 2011 5
    • 6. Impact of the Recent Financial Turmoil on Exchange Rate Source: Bloomberg Note: Latest data from August 29, 2013 BilateralExchangeRateagainst$ (AnnualChange,%) 6 23 20 15 14 12 7 6 3 0 0 -2 -3 -4-5 0 5 10 15 20 25
    • 7. Impact of Exchange Rate Depreciation Inflation* Pass Through: 15% Exports** [0, 0.4] Imports** [0.2, 0.4] 7 • Kara H. and F. Ogunc (2011) Central Bank of Turkey • ** Various econometric research notes
    • 8. Impact of Exchange Rate Depreciation on Financial Stability 8 April, 2013 (Bn $) Assets Liabilities Net FX Position Public Sector* 110.6 86.1 $24.5 Banking Sector 400.6 397.6 3 Nonbank Financial Sector 13.5 11.5 2.0 Real Sector 87.0 232.9 -145.9 Households 191.0 0.4 190.5 Source: May 2013 Financial Stability Report, CBRT * Source, Treasury
    • 9. Impact of the Recent Financial Turmoil on Interest Rates Source: Bloomberg **Chile-Brazil: 9-year bond yield Note: Latest data from August 29, 2013 10-yearbondyield,annualchange,bps** 9 241 225 174 118 101 71 60 5 0 -6 -18 -42 -78-100 -50 0 50 100 150 200 250 300
    • 10. Impact of Interest Rate Hike 10 Disinflation Growth
    • 11. Impact of the Recent Financial Turmoil on Stock Market 11Source: Bloomberg Note: Latest data from August 29, 2013 AnnualChange(%) 20 17 2 2 1 1 -1 -3 -3 -6 -6 -14 -14 -20 -15 -10 -5 0 5 10 15 20 25
    • 12. Impact of Declining Stock Prices Only 1/3 of free float held by Turks Private pension funds only around $3bn Insignificant wealth effect 12
    • 13. Economic Outlook 13
    • 14. ‹#›
    • 15. Real Economic Activity Indicators Source: CBRT, TURKSTAT -25 -20 -15 -10 -5 0 5 10 15 20 25 2008-1 3 5 7 9 11 2009-1 3 5 7 9 11 2010-1 3 5 7 9 11 2011-1 3 5 7 9 11 2012-1 3 5 7 9 11 2013-1 3 5 7 Industrial Production Index*(c.a.) Capacity Utilization** * Percent ** Basis points AnnualChange(%) 15
    • 16. PMI Source: HSBC 49.8 30 35 40 45 50 55 60 2007-1 3 5 7 9 11 2008-1 3 5 7 9 11 2009-1 3 5 7 9 11 2010-1 3 5 7 9 11 2011-1 3 5 7 9 11 2012-1 3 5 7 9 11 2013-1 3 5 7 Seasonal, Ra madan impact Expansionary 16
    • 17. Confidence Indices Source: CBRT, TURKSTAT 50 55 60 65 70 75 80 85 90 50 60 70 80 90 100 110 120 130 2007-1 3 5 7 9 11 2008-1 3 5 7 9 11 2009-1 3 5 7 9 11 2010-1 3 5 7 9 11 2011-1 3 5 7 9 11 2012-1 3 5 7 9 11 2013-1 3 5 7 Real Sector Confidence Index (Left) Consumer Confidence Index (Right) 17
    • 18. * Credit Growth is adjusted for exchange rate movements Source: CBRT Credit Growth13weekmovingavg.,y-on-y% 31.0 0 5 10 15 20 25 30 35 40 45 2011-Jan. Feb. Mar. Mar Apr. May. Jun. July. Aug. Sep. Oct. Nov. Dec. 2012-Jan. Feb. Mar. Mar Apr. May. Jun. July. Aug. Sep. Oct. Nov. Dec. 2013-Jan. Feb. Mar. Mar April May Jun. July. 18
    • 19. EmploymentEmploymentsinceend-2007 (MnPeople,s.a.) Source:TURKSTAT 20 21 22 23 24 25 26 27 2008-1 2009-1 2010-1 2011-1 2012-1 2013-1 19
    • 20. Downside risks to Growth Outlook Higher borrowing costs due to • Increased global risk perception • Tighter domestic monetary policy Weaker global economic growth • Recovery in the Eurozone remains below expectations Geopolitical Disputes Oil Price Hikes 20
    • 21. Upside risks to Growth Outlook Urban Renewal 2B Removal of Reciprocity Incentives IG Credit Ratings Reconciliation Process 21
    • 22. Current Account Deficit: A Soft Spot 22
    • 23. ‹#›
    • 24. Gold Effect(12MonthRolling,USDbn) Source: CBRT -80 -70 -60 -50 -40 -30 -20 -10 0 2007-1 4 7 10 2008-1 4 7 10 2009-1 4 7 10 2010-1 4 7 10 2011-1 4 7 10 2012-1 4 7 10 2013-1 4 Current Account excluding Gold Current Account 24 Net Gold Exports • 2011: -$4.8 billion • 2012: +$5.7 billion • 2013 Jan-Jul: -$8.4 billion
    • 25. Financing of Current Account Deficit (12MonthRolling,USDbn) Source: CBRT -10 0 10 20 30 40 50 60 70 80 90 2007-1 3 5 7 9 11 2008-1 3 5 7 9 11 2009-1 3 5 7 9 11 2010-1 3 5 7 9 11 2011-1 3 5 7 9 11 2012-1 3 5 7 9 11 2013-1 3 5 FDI Inflows and Long-Term Portfolio and Short-Term Current Account Deficit 25
    • 26. 8 34 0 5 10 15 20 25 30 35 40 2002 2012 Diversified Export Markets Number of Export Markets over $1 billion Source: TURKSTAT 26
    • 27. Europe 56.6% Other 43.4% 2002 Exports to Europe are on the Fall Europe 38.8% Other 61.2% 2012 Source: TURKSTAT 27
    • 28. Source: TURKSTAT But, Exports to MENA are on the RiseExportstoMENA(%ofTotal) 12.1 31.6 5 10 15 20 25 30 35 2002 2012 28
    • 29. 9 30 0 5 10 15 20 25 30 35 2002 2012 Number of Products over $1 billion Diversified Product Bundle Source: TURKSTAT 29
    • 30. Real Effective Exchange Rate Source: CBRT (2003=100) 80 90 100 110 120 130 140 150 2003-1 4 7 10 2004-1 4 7 10 2005-1 4 7 10 2006-1 4 7 10 2007-1 4 7 10 2008-1 4 7 10 2009-1 4 7 10 2010-1 4 7 10 2011-1 4 7 10 2012-1 4 7 10 2013-1 4 7 CPI Based REER CPI (Developing Countries) Based REER CPI (Developed Countries) Based REER 30
    • 31. Reserves are Still Strong (Bn$) Source: CBRT 31 60 65 70 75 80 85 90 95 100 105 110 115 120 125 130 135 8/23/2007 11/23/2007 2/23/2008 5/23/2008 8/23/2008 11/23/2008 2/23/2009 5/23/2009 8/23/2009 11/23/2009 2/23/2010 5/23/2010 8/23/2010 11/23/2010 2/23/2011 5/23/2011 8/23/2011 11/23/2011 2/23/2012 5/23/2012 8/23/2012 11/23/2012 2/23/2013 5/23/2013 8/23/2013
    • 32. Most Importantly, We have Strong Fundamentals Banking Sector Household Leverage Public Finance 32
    • 33. 10.8 7.9 4.1 0.1 -1.3 0.2 1.6 5.5 3.0 0.4 1.0 1.4 1.2 0.9 -2 0 2 4 6 8 10 12 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Maastricht Criteria: 3% Medium-Term Program (2013-15) Achieved Maastricht Criteria except 2009 Source: Ministry of Development BudgetDeficit-to-GDP,% Strong Fiscal Position 33
    • 34. 74.0 67.7 59.6 52.7 46.5 39.9 40.0 46.1 42.3 39.1 36.2 35.0 33.0 31.0 30 35 40 45 50 55 60 65 70 75 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Medium-Term Program (2013-15) Lower Public Debt Debt-to-GDP,% Satisfying Maastricht Criteria since 2004 Maastricht Criteria: 60% Source: Treasury 34
    • 35. Banking SectorCapitalAdequacyRatio,% Target Rate 12% Legal Rate 8% Source: BRSA Capital adequacy ratio twice the minimum legal limit of 8%. 16.34 0 5 10 15 20 25 30 35 2003-1 5 9 2004-1 5 9 2005-1 5 9 2006-1 5 9 2007-1 5 9 2008-1 5 9 2009-1 5 9 2010-1 5 9 2011-1 5 9 2012-1 5 9 2013-1 5 35
    • 36. Household Leverage Source: CBRT, ECB (HouseholdLiabilities,%ofGDP,2012) 65.5 21.2 0 20 40 60 80 100 120 140 160 Denmark Netherlands Ireland United Kingdom Portugal Sweden Spain Euro area Finland Greece Malta Germany France Belgium Luxembourg Austria Italy Estonia Poland Latvia Czech Republic Hungary Slovenia Slovakia Lithuania Turkey 36
    • 37. Moderate Corporate Leverage 39.2 34.1 0 20 40 60 80 100 120 Luxembourg Spain Portugal Netherlands Ireland Denmark Italy Slovenia Austria Sweden Greece France Turkey Latvia Estonia Germany Finland Average Belgium United Kingdom Hungary Lithuania Slovakia Czech Republic Poland (Corporateliabilities,%,GDP) Source: CBRT, Cetinkaya, March 2013, BRSA 37
    • 38. Reform Agenda 38
    • 39. Chapter - 1 Moving Up the Value Chain Deepening Capital Markets Combatting the Shadow Economy Improving Infrastructure 39
    • 40. Moving Up the Value Chain 40
    • 41. Why is R&D so significant for us? The share of high and medium-high technology sectors in production and in export is low Boosting R&D Source: Ministry of Development 27.6 72.4 35.6 64.4 0 10 20 30 40 50 60 70 80 High and Medium-High Low and Medium-Low Production Export 41
    • 42. Source: The Scientific and Technological Council of Turkey R&D Spending • 3.00%2023 • 0.86%2011 • 0.53%2002 42
    • 43. Industrial Design Applications 41,226 applications in 2012 Up by 103% since 2002 Source: TPI 43
    • 44. Trade Mark Applications Source: TPI • 36,578 2002 • 109,767 2012 44
    • 45. Patent Applications Source: TPI 1,874 11,555 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 11,000 12,000 2002 2012 45
    • 46. Deepening Capital Markets 46
    • 47. A New Capital Markets Law •Increasing financial deepening & innovation •Strengthening investor rights •Improving corporate governance New legal framework in line with the best global practices 47
    • 48. Restructuring of Borsa Istanbul Regional Leadership Raising Market Cap/GDP to 80% 1,000 new companies to be listed 48
    • 49. Istanbul as a Financial Center Financial sector currently employs 200 thousand people Istanbul Finance Center is likely to add 150 thousand 49
    • 50. Increasing Savings: Private Pensions 25% State Contribution Penalty for Early Withdrawals 50
    • 51. Incentives for Global Fund Managers A tax free environment for Global Funds Making it easier to manage assets in Turkey 51
    • 52. Incentives for Venture Capital Allowing contributions to Venture Capital to be deducted from Corporate & Personal Income Tax Base, up to • 10% of VC Revenues • 20% of VC Capital Tax Relief on Dividends 52
    • 53. Incentives for Business Angels 53
    • 54. Sukuk Similar to euro bonds, international holders Sukuk will not be subject to withholding tax Sep-12: First Sukuk issued for $1.5bn in international market Oct-12: Sukuk denominated in TL issued for TL1.6bn in domestic market Feb-13: Sukuk issued for TL1.5bn Aug-13: Sukuk issued for TL1.8bn 54
    • 55. Combatting the Shadow Economy 55
    • 56. Informal Employment 52.1 51.7 50.1 48.2 47.0 45.4 43.5 43.8 43.3 42.1 39.0 37.7 35 37 39 41 43 45 47 49 51 53 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013May Source:TURKSTAT (%,TotalEmployment) 56
    • 57. Size of Shadow Economy (%, GDP) 32.2 31.5 30.7 30.4 29.1 28.4 28.9 28.3 27.7 27.2 26.5 26 27 28 29 30 31 32 33 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: Schneider, 2013 Down 6 percentage points 57
    • 58. Size of Shadow Economy (%, GDP) 31.2 28.4 28.4 28.0 27.6 26.5 25.5 25.2 24.3 23.8 23.6 23.1 22.1 21.1 19 18.6 18.5 16.4 15.5 15 13.9 13.6 13 13 13 12.2 9.9 9.7 9.1 8 7.6 7.1 5 10 15 20 25 30 35 Bulgaria Romania Crotia Lithuania Estonia TURKEY Latvia S.Cyprus Malta Poland Greece Slovenia Hungary Italy Portugal Spain Average Belgium CzechRep. SlovakRep. Sweeden Norway Denmark Finland Germany Ireland France UK Netherland Luxemburg Austria Switzerland Source: Schneider, 2013 But still higher than EU average 58
    • 59. Tax Loss (% GDP) 7.8 7.3 7.4 7.5 7.5 7.1 6.8 6.3 5.7 5.3 5.3 5.7 3.6 3.4 3.4 3.4 3.5 3.4 3.3 3.1 2.9 2.6 2.5 2.8 2 3 4 5 6 7 8 9 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Turkey Sample Average 3ppt higher than the EU average Source: Schneider, 2012 59
    • 60. Improving Infrastructure 60
    • 61. 1,714 Km Total of Motorways 4,387 Km Total of State and Provincial Dual Carriageways Total: 6,101 Km Dual Carriageway Network (January 1, 2003) 2,244 Km Total of Motorways 20,152 Km Total of State and Provincial Dual Carriageways Total: 22,396 Km Dual Carriageway Network (July 1, 2013) 61
    • 62. Under Construction Completed High Speed Railway Projects 62Source: Ministry of Transport İSTANBUL ESKİŞEHİR POLATLI ANKARA KONYA SİVAS 212 km 533 km 405 km YOZGAT Yerköy AFYON İZMİR MANİSA 624 km BURSA BİLECİK 105 km
    • 63. • The number of airports serving scheduled flights = 262003 • The number of airports serving scheduled flights = 522013 Airports Available For Civil Aviation Traffic in Turkey Airports serving Scheduled Flights (52) Airports under Construction (3) Airports Planned (1) 63
    • 64. Chapter - 2 Enhancing Human Capital Stock Improving Labor Market Flexibility Reducing Energy Import Bill Reconciliation Process 64
    • 65. Enhancing Human Capital Stock 65
    • 66. Students (%, Total Population) 39 22 15 20 25 30 35 40 45 Turkey EU Source: TURKSTAT, Eurostat 66
    • 67. 21 0 10 20 30 40 50 60 70 80 90 Germany France UnitedKingdom Italy Spain Poland Romania Turkey Netherlands Greece Belgium Portugal CzechRepublic Hungary Sweden Austria Switzerland Bulgaria Denmark Slovakia Finland Norway Ireland Croatia Lithuania Macedonia Slovenia Latvia Estonia Cyprus Montenegro Luxembourg Malta Iceland Liechtenstein Turkey’s Student Population Source: Ministry of Development, Eurostat Population,million 67
    • 68. 9.4 17 8 10 12 14 16 18 2002 2013 Source: Ministry of Finance Share of Education Budget% 68
    • 69. Investment in Education Over the last decade, we have • Built 188,000 classrooms • Hired 357,000 teachers Source: Ministry of Education 69
    • 70. Gross Schooling Rates Source: Ministry of Development 11.2 96.5 80.8 35.8 44.0 107.6 96.8 81.6 10 30 50 70 90 110 130 Preschool (age of 4-5 ) Primary School Secondary School Higher Education 2002-2003 2012-2013 70
    • 71. Source: OECD, PISA 2009 PISA Results - Mathematics 43rd (among 65 countries) 445 350 375 400 425 450 475 500 525 550 71
    • 72. ‹#›
    • 73. Improving Quality of Education With Fatih Project, we are providing our children with Broadband Internet Access Smart Boards Tablet PCs Other Information Technology Tools 73
    • 74. Source: OECD Fatih to help FURTHER reduce the gap between Turkey & OECD (PISA Results) 30 40 50 60 70 80 science math 2006 2009 74
    • 75. Improving Labor Market Flexibility 75
    • 76. Low Employment Rate Early retirement Low rate of female labor force participation Rigidities in labor force market 76
    • 77. Average Retirement Age 41.0 44.9 61.9 63.3 30 35 40 45 50 55 60 65 Female Male Turkey OECD Source: OECD 77
    • 78. Labor Participation Rate, Female OECD Average: 62.3 Source: TURKSTAT, OECD LaborParticipationRatebyEducation (2013May) 31.8 18.8 27.6 33.3 40.7 72.1 10 20 30 40 50 60 70 80 Total Illeterate Less than high school High school Vocational high school Higher education 78
    • 79. Improving Girls’ Education 2002 91.1 girls per 100 boys 2012 101.8 girls per 100 boys 79
    • 80. Source: OECD Highest among OECD countries Average Usual Weekly Hours Worked on the Main Job 48.9 30 32 34 36 38 40 42 44 46 48 50 Turkey Korea Mexico Greece Czech… Israel Slovak… Poland Iceland Slovenia Hungary Portugal Chile Canada Estonia Spain France Austria Italy NewZealand Finland Luxembourg Belgium Sweden United… Australia Germany Switzerland Ireland Norway Denmark Netherlands Highest among OECD countries 80
    • 81. Reducing Energy Import Bill 81
    • 82. ‹#›
    • 83. High Dependence on Energy Imports 72% Total Energy 92% Oil 98% Natural-Gas 83
    • 84. Developing Local & Renewable Resources Source: Ministry of Energy and Natural Resources Electricity Generation Installed Capacity MW % of Total Current Installed Capacity (Sept, 2012) 55,663 - Renewable Energy 20,963 37.7 Power Plants Under Construction 23,396 - Renewable Energy 15,879 67.9 TOTAL 79,029 - Renewable Energy 36,843 46.6 84
    • 85. Building the Nuclear Capacity Akkuyu: JW with Russia Sinop JW with a Japanese-French consortium Working on a 3rd plant 85
    • 86. Improving Energy Efficiency Industry 20% Transportation 15% Construction 30% 86
    • 87. Privatization • Distributions: Done Hamitabat Termal Power Plant Seyitömer Termal Power Plant Kangal Termal Power Plant • Generation: 16,530MW on sale 87
    • 88. Reconciliation Process 88
    • 89. Lost Decades About 40,000 deaths About $350 billion spent on fighting terrorism Indirect cost is more than $1 trillion 89
    • 90. Turkey’s Strong Long-Term Prospects 90
    • 91. GDP Source: TURKSTAT, Medium-Term Program,PwC 2002 2050 2002 $ 230 billion 2050 $ 5 trillion 2012 $ 786 billion 2023 $ 2 trillion 91
    • 92. GDP per Capita Source: TURKSTAT, Medium-Term Program,PwC 2002 2050 2002 $ 3,492 2012 $10,504 2023 $ 25,000 2050 $ 50,000 92
    • 93. Determinants of Long-Term Growth Quality of Institutions Demographics Productivity 93
    • 94. Improving Quality of Institutions Doing Business Corruption Perception Index Global Competitiveness Index Human Development Index OECD-FDI Regulatory Restrictiveness Index Past Present 2023 Source: WB, WEF, Transparency International, OECD 94
    • 95. Favorable Demographics Source: Eurostat Shareof15-24yearsoldinTotalPop.(%) 16.8 7 9 11 13 15 17 19 21 Andorra Italy Greece Spain Portugal Germany Slovenia Ireland Bulgaria Luxembourg Switzerland Croatia Czech Republic Austria Liechtenstein Serbia Hungary Netherlands Finland France Denmark United Kingdom Norway Sweden Estonia Ukraine Malta Poland Latvia Slovakia Montenegro Lithuania Iceland Macedonia Georgia Turkey Moldova Azerbaijan 95
    • 96. 2.0 1.0 0.3 0.7 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0 Turkey USA EU-27 OECD AnnualAveragePopulationGrowthRate (%,2001-11)Growth Rate of Working-Age Population Source: OECD, Eurostat, TURKSTAT 96
    • 97. Have Investors Noticed the Transformation? 97
    • 98. International Companies Operating in Turkey (1000s) Source: Ministry of Economy 5.6 6.7 8.8 11.7 15.0 16.1 19.2 21.9 25.2 29.9 33.4 33.8 0 5 10 15 20 25 30 35 40 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Apr 98
    • 99. Foreign Direct Investment Inflows Source: CBRT (Billiondollar) 14.8 122.7 0 20 40 60 80 100 120 140 1980-2002 2003-2012 99
    • 100. ‹#›
    • 101. THANK YOU… 101

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