Turkish Economic OutlookNovember 23, 2012Mehmet ŞimşekMinister of Finance1
Outline2Determinants of Long-Term GrowthShort-Term Macro OutlookFiscal Performance & OutlookChallenges & Structural Issues...
Determinants of Long-Term GrowthQuality of InstitutionsDemographicsProductivity3
Progress along These Lines?4
Quality of InstitutionsCombattingcorruptionCreating a levelplaying fieldImprovinginternationalcompetitiveness5
Corruption Perceptions Index (2002)(65th among 102 countries)3144 4558 59657073 74962030405060708090100 ItalyGreeceBrazilM...
Corruption Perceptions Index (2011)6166 66 697375 758095100 100 100143152406080100120140160TURKEYCrotiaSlovakRepublicItaly...
Within the period of 2005-2012, Turkey has ranked higher than Russia, Argentina and Greece.(71st among 117 countries)38454...
Within the period of 2005-2012, Turkey has ranked higher than Russia, Argentina and Greece.(43rd among 144 countries)Sourc...
6269 707184939710811112213113860708090100110120130140MexicoItalyUruguayRomaniaTURKEYArgentinaRussiaChinaGreeceBrazilIndone...
4871 72737884 8991112124 128 130 13213720406080100120140MexicoTURKEYRomaniaItalyGreeceCrotiaUruguayChinaRussiaArgentinaInd...
EU Accession12Despite unfavorable politics of enlargement,EU accession process is relevantDespite the general perception o...
Favorable Demographics13Source: EurostatShareof15-24yearsinTotalPopn(%)16,879111315171921 AndorraItalyGreeceSpainPortugalG...
71,930,383,468,82030405060708090Male FemaleOverall Higher EducationLabor Participation Rate2012July(%)Source: TURKSTATRoom...
Improving Girls’ Education2002 201191 girls per100 boys100.4 girls per100 boys
Source: Ministry of DevelopmentSchooling Ratios are Improving (Gross Rates)1611,296,580,835,846,4108,492,681,6103050709011...
Have Investors noticed theTransformation?17
Int’l Companies Operating in Turkey (1000s)Source: Ministry of Economy185,66,78,811,715,016,119,222,025,329,630,9051015202...
Foreign Direct Investment InflowsSource: CBRTBilliondollar14.8119.90204060801001201401980-2002 2003-2012 September19
REER AppreciationSource: CBRT(2003=100)2055657585951051151251351989-171990-171991-171992-171993-171994-171995-171996-17199...
SHORT-TERM MACRO OUTLOOK21
Back to Growth22
Strong Post-Crisis RecoverySource: TURKSTATRealGDP(s.a,2007Q4=100)96,1101,688,2114,1808590951001051101152007-Q1Q2Q3Q42008-...
Done with Rebalancing?ContributiontoGrowth,%Source: TURKSTAT17,313,59,52,21,0-2,0-5,6-5,10,53,24,65,7-6-14914Q1-11 Q2-11 Q...
Indicators Point to Pick up in DemandPurchasingManagersIndexSource: CBT, HSBCCapacityUtilizationRate2555606570758085303540...
Factors Supportive of Growth26
Strong EmploymentSource: TURKSTATEmployment(MnPeople,s.a.)272021222324252008-12009-12010-12011-12012-1
Unemployment at Decade Low28801001201401601802002202008-12009-12010-12011-12012-1USAEU-27TurkeyUnemploymentRate,s.a.(Decem...
Well-Capitalized & Highly Profitable Banks5101520252006-12007-12008-12009-12010-12011-12012-1Target Rate 12%CapitalAdequac...
Solid Asset Quality30NonperformingLoanstoTotalLoans*,%* Latest dataSource: BRSA, IMF2,9048121620GreeceRomaniaItalyPortugal...
Relatively under-Leveraged Households95,488,066,019,5020406080100120England US Euro Area TurkeyHouseholdLiabilities,%ofGDP...
Easier Financial Conditions325,009,005,75381320.10.201122.12.201122.02.201218.04.201221.06.201216.08.201219.10.2012O/N Bor...
13weekmovingavg.,y-on-y%Credit GrowthSource: Central Bank of Turkey.Note: Credit Growth is adjusted for exhange movements....
Other Factors34Urban RenewalSale of 2B LandRemoval ofReciprocity
Fiscal Performance & Outlook35
General Government Deficit10.81.60.9-327122002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Projections...
Gross Public Debt74.036.531.0303540455055606570752002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Proj...
88.4-3.5-5515253545556575852002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Q238(BillionTL)Zeroing Net Public Sector ...
2012 Oct.200344%47%9%Fixed Floating CPI Indexed53%28%19%Fixed Floating CPI IndexedLower Interest Rate RiskSource: Treasury...
4041.972.858.127.2203040506070802002 2011TL Stock Döviz StockFX SockLower FX RiskCentralGovernmentDebtStock(%)Source: Trea...
41Source: TreasuryNote: As of August 2012, the average maturity of domestic cash borrowing is 60.8 months.9.444.7813182328...
A Soft Spot: Current Account Deficit42
Current Account Deficit is Large, but(12MonthRolling,USDbn)Source: Central Bank of TurkeyNarrowing43-80-60-40-20020402002-...
Financing Quality is ImprovingSource: CBRT(12MonthRolling,USDbn)44-1001020304050607080902007-13579112008-13579112009-13579...
REER is still Supportive of AdjustmentSource: Central Bank of TurkeyCPI-DevelopingCountries-BasedREER(2003=100)45859095100...
Europe56.6%Other43.4%Exports 2002Diversifying away from Europe?Europe38.3%Other61.7%Exports Jan-Sep 2012Source: TURKSTAT46
Source: TURKSTATExports to Asia (% Total Exports)14,535,912182430362002 2012Jan-Sep47
Source: TURKSTATMENA: a life saverExportstoMENA(%ofTotal)12,132,81015202530352002 2012Jan-Sep48
Exports by Destination(3-MonthMA,2007=100)Source: TURKSTAT49601201802403003602007-13579112008-13579112009-13579112010-1357...
832051015202530352000 2011Source: TURKSTATExport Diversification - INumber of Products over $1 billion50
530051015202530352000 2011Source: TURKSTATNumber of Export Markets over $1 billionExport Diversification -II51
Share of Largest Five in Total Exports (%)Source: TURKSTAT2002 2011Germany 16.3 Germany 10.3USA 9.3 Iraq 6.2United Kingdom...
Current Account Deficitas a Structural Problem53
Savings-Investment Gap(%)Source: Ministry of Development541012141618202224262002 2003 2004 2005 2006 2007 2008 2009 2010 2...
-505101520252002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Public Savings/GDP Private Savings/GDPFall in Private Sa...
Source: Ministry of Development, Bloomberg*2012 September 12 Month RollingEnergy Import Bill(BrentType,Dollar/Barrel)Energ...
Medium-to Long-Term Remedies toNarrow Current Account DeficitIncentives for private pensionFocus on local & renewable ener...
58Medium-Term Outlook
Economic GrowthSource: MTP3,24,05,0 5,03,03,54,04,55,05,52012 2013 2014 2015RealGDPGrowth(%)59
Headline Inflation (CPI, %, eop)Source: MTP(%)7,45,35,0 5,0456782012 2013 2014 201560
General Government Deficit (%, GDP)Source: MTP611,61,51,20,90,81,01,21,41,61,82012 2013 2014 2015
Public Sector Primary Balance (%, GDP)Source: MTP620,50,81,01,10,40,50,60,70,80,91,01,11,22012 2013 2014 2015
63Satisfying Maastricht Criteria since 2004Source: MTP36,535,033,031,030313233343536372012 2013 2014 2015Gross Public Debt...
Current Account Deficit (%, GDP)64Source: MTP7.37.16.96.56,46,66,877,27,42012 2013 2014 2015
Deterioration in the Eurozone CrisisUSA Debt Ceiling and the Fiscal CliffHard Landing in Emerging MarketsGeopolitical Risk...
66Reform Agenda
Reform Agenda67Tax ReformCombatting the Shadow EconomyJudicial ReformImproving Quality of EducationDeepening Financial Mar...
Tax Reform68
Our Tax PolicyImproving FiscalDisciplineRaising Employment& InvestmentsReducing RegionalDevelopment GapsIncreasingCompetit...
Simplifying Tax SystemBuilding a Simple and Effective Tax system• Boosting competitiveness• Widening tax base• Increasing ...
Legislative Tax Reforms: CompletedCorporateIncome TaxTransferPricingCommercialCode
Legislative Tax Reforms: Under ProgressPersonal Income Tax Tax Procedure Law
Combatting the Shadow Economy73
Combatting the Shadow EconomyA levelplayingfieldImprovedBusinessEnvironmentHealthyEconomySound FiscalPerformanceBetterSoci...
Source: Schneider, 2012Size of the Shadow Economy (2012, % GDP)32,329,629,52928,627,226,52625,82524,322,821,619,419,219,21...
Source: Schneider, 2012Turkey: Size of the Shadow Economy (% GDP)32,231,530,730,429,128,428,928,327,727,226272829303132332...
Source: Schneider, 2012Size of Pure Tax Evasion (% GDP)7,87,37,47,57,57,16,86,35,75,35,35,73,63,43,43,43,53,43,33,12,92,62...
Judicial Reform78
Reforms794th Judicial PackageA New ConstitutionNew Patent Law
Improving Quality of Education80
11.368.10102030405060702002 2013Source: Ministry of FinanceResources Allocated to EducationBillionTL81
Improving Quality of EducationWith Fatih Project, we are providing our children withBroadband Internet AccessSmart BoardsT...
Deepening Financial Markets83
Revising Capital Markets Law84New legal framework in line with thebest global practices•Increasing financial deepening & i...
Restructuring of ISE85Regional LeadershipRaising Market Cap/GDP to 80%1,000 new companies
Increasing Private Pensions25% State ContributionPenalty for Early Withdrawals86
Incentives for Global Fund ManagersA tax free environment for Global Funds87Making it easier to manage assets in Turkey
Incentives for Venture Capital• 10% of VC Revenues• 20% of VC CapitalAllowing Venture Capital to be deducted fromCorporate...
Incentives for Business Angels8975% income tax relief onAngel Capital100% tax relief forR&D and InnovationIncome & Withhol...
SukukGlobal issuance: $170 bnSimilar to euro bonds, international holders of Sukukwill not be subject to withholding taxSe...
Enhancing Investment Climate91
YENİ TEŞVİK SİSTEMİRegional Customs DutyExemption VAT Exemption Lower CIT rate Support for theemployer’s share ofinsur...
Labor Market Reforms93
National Employment Strategy4 Main ObjectivesReducing labor market rigiditiesIncreasing employment of women, youth and the...
Average Weekly Hours Worked on the Main Job (2011)Source: OECD9548,93032343638404244464850TurkeyKoreaMexicoGreeceCzechRepu...
Share of Part-time Employment (%, 2011)Source: OECD9611,70510152025303540NetharlandsSwitzerlandIrelandAustraliaUnitedKingd...
R&D and Innovation97
Why is R&D so significant for us?The share of high and medium-hightechnology sectors in production and inexport is lowBoos...
•0.862011•0.532002Source: The Scientific and Technological Council of Turkey99R&D Spending
Brand Turkey, moving up the LaddersSource: Brand - Finance100With a brand value of$487bn, Turkey ranks inthe top 20.
Boosting R&D InnovationCreatingBrand NamesMoving up the Value Chain101
Industrial Design Applications36,578 applications in 2011Up by 80 % since 2002Ranking 3rd in EuropeSource: TPI102
Trademark Applications• 117,7232011• 36,4292002Source: Turkish Patent Instıtute103
Building a better Infrastructure104
1,714 KmTotal of Motorways4,387 KmTotal of State andProvincial DualCarriagewaysTotal: 6,101 KmDual CarriagewayNetwork(Janu...
Our RailwaysPRE-REPUBLIC RAILWAY NETWORK 4,136 km MAINLINEEARLY YEARS OF THE REPUBLIC (1923-1950) 3,764 km MAINLINE (134 k...
High Speed Railway ProjectsİSTANBULESKİŞEHİR POLATLIANKARAKONYASİVAS212km533km405kmYOZGATHST lines to be completed until 2...
AIRPORTS AVAILABLE FORCIVIL AVIATION TRAFFIC IN TURKEY20032012Airports serving Scheduled Flight(48)Airports under Construc...
THANK YOU…109
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Economic Outlook of Turkey

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Economic Outlook of Turkey

  1. 1. Turkish Economic OutlookNovember 23, 2012Mehmet ŞimşekMinister of Finance1
  2. 2. Outline2Determinants of Long-Term GrowthShort-Term Macro OutlookFiscal Performance & OutlookChallenges & Structural IssuesMedium-Term OutlookReform Agenda
  3. 3. Determinants of Long-Term GrowthQuality of InstitutionsDemographicsProductivity3
  4. 4. Progress along These Lines?4
  5. 5. Quality of InstitutionsCombattingcorruptionCreating a levelplaying fieldImprovinginternationalcompetitiveness5
  6. 6. Corruption Perceptions Index (2002)(65th among 102 countries)3144 4558 59657073 74962030405060708090100 ItalyGreeceBrazilMexicoChinaTURKEYArgentinaIndiaRussiaIndonesiaSource: Transperancy Intenational6
  7. 7. Corruption Perceptions Index (2011)6166 66 697375 758095100 100 100143152406080100120140160TURKEYCrotiaSlovakRepublicItalyBrazilChinaRomaniaGreeceIndiaArgentinaIndonesiaMexicoRussiaUkraine(61st among 183 countries)Source: Transperancy Intenational7
  8. 8. Within the period of 2005-2012, Turkey has ranked higher than Russia, Argentina and Greece.(71st among 117 countries)384547 48535457 59697130354045505560657075ItalyIndiaGreeceChinaRussiaArgentinaBrazilMexicoIndonesiaTURKEYSource: World Economic ForumGlobal Competitiveness Index (2005)8
  9. 9. Within the period of 2005-2012, Turkey has ranked higher than Russia, Argentina and Greece.(43rd among 144 countries)Source: World Economic ForumGlobal Competitiveness Index (2012)294142 434849505359 6067717378942030405060708090100ChinaPolandItalyTURKEYBrazilPortugalIndonesiaMexicoIndiaHungaryRussiaSlovakRepublicUkraineRomaniaArgentineMoved up 16 places in a year2nd fastest rising country9
  10. 10. 6269 707184939710811112213113860708090100110120130140MexicoItalyUruguayRomaniaTURKEYArgentinaRussiaChinaGreeceBrazilIndonesiaIndia(84th among 175 countries)Source: World BankEase of Doing Business (2006)10
  11. 11. 4871 72737884 8991112124 128 130 13213720406080100120140MexicoTURKEYRomaniaItalyGreeceCrotiaUruguayChinaRussiaArgentinaIndonesiaBrazilIndiaUkraine(71st among 185 countries)Source: World BankEase of Doing Business (2013)11
  12. 12. EU Accession12Despite unfavorable politics of enlargement,EU accession process is relevantDespite the general perception of no progress,the underlying trend is positive
  13. 13. Favorable Demographics13Source: EurostatShareof15-24yearsinTotalPopn(%)16,879111315171921 AndorraItalyGreeceSpainPortugalGermanySloveniaIrelandBulgariaLuxembourgSwitzerlandCroatiaCzechRepublicAustriaLiechtensteinSerbiaHungaryNetherlandsFinlandFranceDenmarkUnitedKingdomNorwaySwedenEstoniaUkraineMaltaPolandLatviaSlovakiaMontenegroLithuaniaIcelandFormerYugoslavRepublic…GeorgiaTurkeyMoldovaAzerbaijan
  14. 14. 71,930,383,468,82030405060708090Male FemaleOverall Higher EducationLabor Participation Rate2012July(%)Source: TURKSTATRoom for improvement with further education14
  15. 15. Improving Girls’ Education2002 201191 girls per100 boys100.4 girls per100 boys
  16. 16. Source: Ministry of DevelopmentSchooling Ratios are Improving (Gross Rates)1611,296,580,835,846,4108,492,681,61030507090110130pre-primary education primary education secondary education higher education2002-2003 2011-2012
  17. 17. Have Investors noticed theTransformation?17
  18. 18. Int’l Companies Operating in Turkey (1000s)Source: Ministry of Economy185,66,78,811,715,016,119,222,025,329,630,90510152025303520022003200420052006200720082009201020112012September
  19. 19. Foreign Direct Investment InflowsSource: CBRTBilliondollar14.8119.90204060801001201401980-2002 2003-2012 September19
  20. 20. REER AppreciationSource: CBRT(2003=100)2055657585951051151251351989-171990-171991-171992-171993-171994-171995-171996-171997-171998-171999-172000-172001-172002-172003-172004-172005-172006-172007-172008-172009-172010-172011-172012-17Linear Trend
  21. 21. SHORT-TERM MACRO OUTLOOK21
  22. 22. Back to Growth22
  23. 23. Strong Post-Crisis RecoverySource: TURKSTATRealGDP(s.a,2007Q4=100)96,1101,688,2114,1808590951001051101152007-Q1Q2Q3Q42008-Q1Q2Q3Q42009-Q1Q2Q3Q42010-Q1Q2Q3Q42011-Q1Q2Q3Q42012-Q1Q223
  24. 24. Done with Rebalancing?ContributiontoGrowth,%Source: TURKSTAT17,313,59,52,21,0-2,0-5,6-5,10,53,24,65,7-6-14914Q1-11 Q2-11 Q3-11 Q4-11 Q1-12 Q2-12Domestic DemandNet Export24
  25. 25. Indicators Point to Pick up in DemandPurchasingManagersIndexSource: CBT, HSBCCapacityUtilizationRate2555606570758085303540455055602007-13579112008-13579112009-13579112010-13579112011-13579112012-13579Purchasing Managers IndexCapacity Utilization Rate
  26. 26. Factors Supportive of Growth26
  27. 27. Strong EmploymentSource: TURKSTATEmployment(MnPeople,s.a.)272021222324252008-12009-12010-12011-12012-1
  28. 28. Unemployment at Decade Low28801001201401601802002202008-12009-12010-12011-12012-1USAEU-27TurkeyUnemploymentRate,s.a.(December2007=100)
  29. 29. Well-Capitalized & Highly Profitable Banks5101520252006-12007-12008-12009-12010-12011-12012-1Target Rate 12%CapitalAdequacyRatio,%Legal Rate 8%Source: BRSA29
  30. 30. Solid Asset Quality30NonperformingLoanstoTotalLoans*,%* Latest dataSource: BRSA, IMF2,9048121620GreeceRomaniaItalyPortugalRussiaSpainCzechRepublicFranceDenmarkUnitedKingdomUnitedStatesBrazilNetherlandsGermanyTurkeyBelgiumAustriaJapanAustraliaCanadaFinland
  31. 31. Relatively under-Leveraged Households95,488,066,019,5020406080100120England US Euro Area TurkeyHouseholdLiabilities,%ofGDP201131Source: CBRT, ECB, Bloomberg
  32. 32. Easier Financial Conditions325,009,005,75381320.10.201122.12.201122.02.201218.04.201221.06.201216.08.201219.10.2012O/N Borrowing O/N Lending One-Week Repo RateSource: CBRT
  33. 33. 13weekmovingavg.,y-on-y%Credit GrowthSource: Central Bank of Turkey.Note: Credit Growth is adjusted for exhange movements.Jan.Feb.Mar.Apr.May.Jun.Jul.Aug.Sep.Oct.Nov.Dec.331001020304050602012 2011 2007-2011 Average
  34. 34. Other Factors34Urban RenewalSale of 2B LandRemoval ofReciprocity
  35. 35. Fiscal Performance & Outlook35
  36. 36. General Government Deficit10.81.60.9-327122002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015ProjectionsGen.Gov.BudgetDeficit/GDP(%)Source: Ministry of Finance
  37. 37. Gross Public Debt74.036.531.0303540455055606570752002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015ProjectionsSource: TreasuryDebt/GDP(%)
  38. 38. 88.4-3.5-5515253545556575852002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Q238(BillionTL)Zeroing Net Public Sector External DebtSource: Treasury
  39. 39. 2012 Oct.200344%47%9%Fixed Floating CPI Indexed53%28%19%Fixed Floating CPI IndexedLower Interest Rate RiskSource: TreasuryNote: Central Government Domestic Debt Stock39
  40. 40. 4041.972.858.127.2203040506070802002 2011TL Stock Döviz StockFX SockLower FX RiskCentralGovernmentDebtStock(%)Source: Treasury
  41. 41. 41Source: TreasuryNote: As of August 2012, the average maturity of domestic cash borrowing is 60.8 months.9.444.7813182328333843482002 2011Lengthening Maturity of Domestic BorrowingMaturityofDebt(Months)
  42. 42. A Soft Spot: Current Account Deficit42
  43. 43. Current Account Deficit is Large, but(12MonthRolling,USDbn)Source: Central Bank of TurkeyNarrowing43-80-60-40-20020402002-147102003-147102004-147102005-147102006-147102007-147102008-147102009-147102010-147102011-147102012-147Current AccountCurrent Account without Energy ImportCurrent Account + Net FDI + Net Errors and Omissions
  44. 44. Financing Quality is ImprovingSource: CBRT(12MonthRolling,USDbn)44-1001020304050607080902007-13579112008-13579112009-13579112010-13579112011-13579112012-13579FDI Inflows and Long-Term Portfolio and Short-Term Current Account Deficit
  45. 45. REER is still Supportive of AdjustmentSource: Central Bank of TurkeyCPI-DevelopingCountries-BasedREER(2003=100)458590951001051101151201252003-147102004-147102005-147102006-147102007-147102008-147102009-147102010-147102011-147102012-14710
  46. 46. Europe56.6%Other43.4%Exports 2002Diversifying away from Europe?Europe38.3%Other61.7%Exports Jan-Sep 2012Source: TURKSTAT46
  47. 47. Source: TURKSTATExports to Asia (% Total Exports)14,535,912182430362002 2012Jan-Sep47
  48. 48. Source: TURKSTATMENA: a life saverExportstoMENA(%ofTotal)12,132,81015202530352002 2012Jan-Sep48
  49. 49. Exports by Destination(3-MonthMA,2007=100)Source: TURKSTAT49601201802403003602007-13579112008-13579112009-13579112010-13579112011-13579112012-13579EU-27 MENA
  50. 50. 832051015202530352000 2011Source: TURKSTATExport Diversification - INumber of Products over $1 billion50
  51. 51. 530051015202530352000 2011Source: TURKSTATNumber of Export Markets over $1 billionExport Diversification -II51
  52. 52. Share of Largest Five in Total Exports (%)Source: TURKSTAT2002 2011Germany 16.3 Germany 10.3USA 9.3 Iraq 6.2United Kingdom 8.4 United Kingdom 6.0Italy 6.6 Italy 5.8France 5.9 France 5.0Largest five 46.5 Largest five 33.452
  53. 53. Current Account Deficitas a Structural Problem53
  54. 54. Savings-Investment Gap(%)Source: Ministry of Development541012141618202224262002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
  55. 55. -505101520252002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Public Savings/GDP Private Savings/GDPFall in Private Savings(%)Source: Ministry of Development55
  56. 56. Source: Ministry of Development, Bloomberg*2012 September 12 Month RollingEnergy Import Bill(BrentType,Dollar/Barrel)EnergyImports(BillionDollars)569,248,354,159,02397111 112,40204060801001200102030405060702002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012SepEnergy Import Oil Prices
  57. 57. Medium-to Long-Term Remedies toNarrow Current Account DeficitIncentives for private pensionFocus on local & renewable energyBoosting R&D investmentsIncentives for creating the Turkish BrandNew investment incentive schemeImproving quality of educationBuilding infrastructure57
  58. 58. 58Medium-Term Outlook
  59. 59. Economic GrowthSource: MTP3,24,05,0 5,03,03,54,04,55,05,52012 2013 2014 2015RealGDPGrowth(%)59
  60. 60. Headline Inflation (CPI, %, eop)Source: MTP(%)7,45,35,0 5,0456782012 2013 2014 201560
  61. 61. General Government Deficit (%, GDP)Source: MTP611,61,51,20,90,81,01,21,41,61,82012 2013 2014 2015
  62. 62. Public Sector Primary Balance (%, GDP)Source: MTP620,50,81,01,10,40,50,60,70,80,91,01,11,22012 2013 2014 2015
  63. 63. 63Satisfying Maastricht Criteria since 2004Source: MTP36,535,033,031,030313233343536372012 2013 2014 2015Gross Public Debt (%, GDP)
  64. 64. Current Account Deficit (%, GDP)64Source: MTP7.37.16.96.56,46,66,877,27,42012 2013 2014 2015
  65. 65. Deterioration in the Eurozone CrisisUSA Debt Ceiling and the Fiscal CliffHard Landing in Emerging MarketsGeopolitical RisksExternal Risks to the Outlook65
  66. 66. 66Reform Agenda
  67. 67. Reform Agenda67Tax ReformCombatting the Shadow EconomyJudicial ReformImproving Quality of EducationDeepening Financial MarketsEnhancing Investment ClimateLabor Market ReformsR&D and InnovationBuilding a better Infrastructure
  68. 68. Tax Reform68
  69. 69. Our Tax PolicyImproving FiscalDisciplineRaising Employment& InvestmentsReducing RegionalDevelopment GapsIncreasingCompetitiveness
  70. 70. Simplifying Tax SystemBuilding a Simple and Effective Tax system• Boosting competitiveness• Widening tax base• Increasing tax predictability• Supporting Investments & Employment70
  71. 71. Legislative Tax Reforms: CompletedCorporateIncome TaxTransferPricingCommercialCode
  72. 72. Legislative Tax Reforms: Under ProgressPersonal Income Tax Tax Procedure Law
  73. 73. Combatting the Shadow Economy73
  74. 74. Combatting the Shadow EconomyA levelplayingfieldImprovedBusinessEnvironmentHealthyEconomySound FiscalPerformanceBetterSocialSafety Net
  75. 75. Source: Schneider, 2012Size of the Shadow Economy (2012, % GDP)32,329,629,52928,627,226,52625,82524,322,821,619,419,219,217,116,4161614,814,713,813,713,512,81110,598,27,97,85101520253035 BulgariaRomaniaCroatiaLithuaniaEstoniaTurkeylatviaCyprusMaltaPolandGreeceHungaryItalyPortugalAverageSpainBelgiumCzechRepSloveniaSlovakiaNorwaySweedenDenmarkFinlandGermanyirelandFranceUKNetherlandsLuxembourgAustriaSwitzerland
  76. 76. Source: Schneider, 2012Turkey: Size of the Shadow Economy (% GDP)32,231,530,730,429,128,428,928,327,727,226272829303132332003200420052006200720082009201020112012
  77. 77. Source: Schneider, 2012Size of Pure Tax Evasion (% GDP)7,87,37,47,57,57,16,86,35,75,35,35,73,63,43,43,43,53,43,33,12,92,62,52,823456789199920002001200220032004200520062007200820092010Turkey Average of 38 CountriesTax evasion is on average 3 ppt higher in Turkey
  78. 78. Judicial Reform78
  79. 79. Reforms794th Judicial PackageA New ConstitutionNew Patent Law
  80. 80. Improving Quality of Education80
  81. 81. 11.368.10102030405060702002 2013Source: Ministry of FinanceResources Allocated to EducationBillionTL81
  82. 82. Improving Quality of EducationWith Fatih Project, we are providing our children withBroadband Internet AccessSmart BoardsTablet PCsOther Information Technology Tools82
  83. 83. Deepening Financial Markets83
  84. 84. Revising Capital Markets Law84New legal framework in line with thebest global practices•Increasing financial deepening & innovation•Strengthening investor rights•Improving corporate governane
  85. 85. Restructuring of ISE85Regional LeadershipRaising Market Cap/GDP to 80%1,000 new companies
  86. 86. Increasing Private Pensions25% State ContributionPenalty for Early Withdrawals86
  87. 87. Incentives for Global Fund ManagersA tax free environment for Global Funds87Making it easier to manage assets in Turkey
  88. 88. Incentives for Venture Capital• 10% of VC Revenues• 20% of VC CapitalAllowing Venture Capital to be deducted fromCorporate & Personal Income Tax Base, up to88Tax Relief from Dividends
  89. 89. Incentives for Business Angels8975% income tax relief onAngel Capital100% tax relief forR&D and InnovationIncome & Withholding TaxRelief on divestment of stocks
  90. 90. SukukGlobal issuance: $170 bnSimilar to euro bonds, international holders of Sukukwill not be subject to withholding taxSep-12: First Sukuk issued for $1.5bnOct-12: Sukuk denominated in TL issued for TL1.6bn90
  91. 91. Enhancing Investment Climate91
  92. 92. YENİ TEŞVİK SİSTEMİRegional Customs DutyExemption VAT Exemption Lower CIT rate Support for theemployer’s share ofinsurance premium Allocation of Land Customs DutyExemption VAT Exemption Lower CIT rate Support for theemployer’s shareof insurancepremium Allocation ofLand Interest Support Customs DutyExemption VAT Exemption Customs DutyExemption VAT Exemption Lower CIT rate Support for theemployer’s shareof insurancepremium Allocation ofLand Interest Support VAT RebateGeneralIn the 6th Region, additional support for The employee’s share of insurance premium Income tax stoppageNew Investment Incentive SchemeLarge-Scale Strategic92
  93. 93. Labor Market Reforms93
  94. 94. National Employment Strategy4 Main ObjectivesReducing labor market rigiditiesIncreasing employment of women, youth and the disadvantageousStrengthening the link between education and employmentStrengthening the link between employment and social protection94
  95. 95. Average Weekly Hours Worked on the Main Job (2011)Source: OECD9548,93032343638404244464850TurkeyKoreaMexicoGreeceCzechRepublicSlovakRepublicPolandIcelandHungarySloveniaPortugalChileEstoniaSpainFranceAustriaItalyNewZealandFinlandLuxembourgBelgiumSwedenUnitedKingdomAustraliaGermanySwitzerlandIrelandNorwayDenmarkNetherlandsHighest among the OECD countries!
  96. 96. Share of Part-time Employment (%, 2011)Source: OECD9611,70510152025303540NetharlandsSwitzerlandIrelandAustraliaUnitedKingdomGermanyNewZelandJapanNorwayCanadaDenmarkAustriaBelgiumMexicoChileIcelandItalyLuxembourgSweedenIsraelFranceKoreaSpainFinlandUnitedStatesTurkeyPortugalGreeceEstoniaSloveniaPolandHungarySlovakRepublicCzechRepublıc9th lowest among the OECD countries.
  97. 97. R&D and Innovation97
  98. 98. Why is R&D so significant for us?The share of high and medium-hightechnology sectors in production and inexport is lowBoosting R&DSource: Ministry of Development27.672.435.664.401020304050607080High and Medium-High Low and Medium-LowProduction Export98
  99. 99. •0.862011•0.532002Source: The Scientific and Technological Council of Turkey99R&D Spending
  100. 100. Brand Turkey, moving up the LaddersSource: Brand - Finance100With a brand value of$487bn, Turkey ranks inthe top 20.
  101. 101. Boosting R&D InnovationCreatingBrand NamesMoving up the Value Chain101
  102. 102. Industrial Design Applications36,578 applications in 2011Up by 80 % since 2002Ranking 3rd in EuropeSource: TPI102
  103. 103. Trademark Applications• 117,7232011• 36,4292002Source: Turkish Patent Instıtute103
  104. 104. Building a better Infrastructure104
  105. 105. 1,714 KmTotal of Motorways4,387 KmTotal of State andProvincial DualCarriagewaysTotal: 6,101 KmDual CarriagewayNetwork(January 1, 2003)2,236 KmTotal of Motorways19,565 KmTotal of State andProvincial DualCarriagewaysTotal: 21,801 KmDual CarriagewayNetwork(October 4, 2012)105
  106. 106. Our RailwaysPRE-REPUBLIC RAILWAY NETWORK 4,136 km MAINLINEEARLY YEARS OF THE REPUBLIC (1923-1950) 3,764 km MAINLINE (134 km on annual average)1951-2003 945 km MAINLINE (18 km on annual average)2003 DEN GÜNÜMÜZE KADAR (2010 dahil) 1.076 km ANAHAT (Yılda Ortalama 135 km)UNDER CONSTRUCTION 2,047 km MAINLINE2003-2011 1,076 km MAINLINE (135 km on annual average)İSTANBULEDİRNEESKİŞEHİRPOLATLIANKARAKONYAİZMİRSİVASAFYONKAYSERİBURSA ERZİNCANERZURUMKARSMERSİNADANA GAZİANTEPDİYARBAKIRELAZIĞMALATYAZONGULDAKSAMSUNBANDIRMAVANTATVAN2010 : 11.940 km ( Konvansiyonel + Yüksek Hızlı )AdapazarıSource: Ministry of Transport2010:12,000 km (Conventional+High Speed)106
  107. 107. High Speed Railway ProjectsİSTANBULESKİŞEHİR POLATLIANKARAKONYASİVAS212km533km405kmYOZGATHST lines to be completed until 2015Completed High Speed Train (HST) Lines: ANK-Eskişehir and ANK-KonyaYerköyHST lines being under-construction in 2015AFYONİZMİRMANİSA 624kmBURSABİLECİK124 km235km ERZİNCANSource: Ministry of Transport 107
  108. 108. AIRPORTS AVAILABLE FORCIVIL AVIATION TRAFFIC IN TURKEY20032012Airports serving Scheduled Flight(48)Airports under Construction (6)Airports being Planned(2)The number ofairports servingscheduledflights=48The number ofairports servingscheduledflights=48The number ofairports servingscheduledflights=26The number ofairports servingscheduledflights=26Airports serving Scheduled Flight(26)108
  109. 109. THANK YOU…109

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