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Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
Financing Sustainable Growth 19.09.2013
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Financing Sustainable Growth 19.09.2013

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  • 1. Financing Sustainable Growth IFS September 19 , 2013 Mehmet Şimşek Minister of Finance
  • 2. Outline 2 Growth: Next Decade & Beyond Map for Sustainable Growth • Short-Term • Long-Term Determinants of Long-Term Growth • How is Turkey positioned?
  • 3. GDP Per Capita 1,099 1,142 1,233 1,320 1,394 1,442 1,434 1,346 1,450 1,557 1,572 1,000 1,100 1,200 1,300 1,400 1,500 1,600 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Real GDP Per Capita 8,662 8,798 10,166 11,389 12,888 13,899 15,022 14,417 15,777 17,037 18,186 8,000 10,000 12,000 14,000 16,000 18,000 20,000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 GDP Per Capita (PPP)
  • 4. Real Convergence with Advanced EconomiesIncomePerCapita(PPP,%) Source: IMF, OECD, TURKSTAT 4 23.4 36.436.9 56.8 20 25 30 35 40 45 50 55 60 2002 2012 Turkey / USA Turkey /European Union
  • 5. Growth: Next Decade & Beyond 5
  • 6. GDP Source: TURKSTAT, Medium-Term Program,PwC 2002 2050 2002 $ 230 billion 2050 $ 5 trillion 2012 $ 786 billion 2023 $ 2 trillion 6
  • 7. GDP per Capita Source: TURKSTAT, Medium-Term Program,PwC 2002 2050 2002 $ 3,492 2012 $10,497 2023 $ 25,000 2050 $ 50,000 7
  • 8. Ambitious Targets Source: IMF, PricewaterhouseCoopers 1. USA 2. China 3. India 4. Japan 5. Germany 6. Russia 8. UK 7. Brazil 9. France 10. Italy 11. Mexico 12. South Korea 13. Canada 14. Spain 15. Indonesia 16. TURKEY 17. Iran 18. Australia 19. Saudi Arabia 20. Taiwan 2012 (GDP-PPP) Target Top 10 in the World Top 3 in Europe 6th in Europe 16th in the World 8
  • 9. Average Real GDP Growth Rates 9 Source: Turkstat, Ministry of Development 4.5 3.1 5.1 5.5 2 3 4 5 6 1924-2002 1993-2002 2003-2012 2014-2018 % Reforms to increase potential growth
  • 10. 10 Road Map for Sustainable Growth
  • 11. 11 Short-Term
  • 12. Financing of Growth in the Short-Term Growing at a moderate rate No boom-bust cycles
  • 13. Real GDP 100.0 118.4 85 90 95 100 105 110 115 120 2007-Q1 Q2 Q3 Q4 2008-Q1 Q2 Q3 Q4 2009-Q1 Q2 Q3 Q4 2010-Q1 Q2 Q3 Q4 2011-Q1 Q2 Q3 Q4 2012-Q1 Q2 Q3 Q4 2013-Q1 Q2 RealGDP(2007Q4=100,s.a.) Source: Turkstat
  • 14. 14 Supported by Job-CreationEmploymentsinceend-2007 (MnPeople,s.a.) Source:TURKSTAT 25.6 20 21 22 23 24 25 26 2008-1 2009-1 2010-1 2011-1 2012-1 2013-1
  • 15. Supported by Sound Macro Fundamentals Low Deficit Low & Declining Public Debt Healthy Banking System Low Household Leverage Moderate Corporate Leverage Diversified Export Markets A Flexible Exchange Rate
  • 16. Low Deficit 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 0.0 2.0 4.0 6.0 8.0 10.0 12.0 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,% 16
  • 17. 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 17
  • 18. Healthy Banking System * Latest data, monthly Source: Banking Regulation and Supervision Agency, IMF 18 2002 2013-7 17.6 2.8 NPLRatioofLoans(%) CapitalAdequacyRatio,% 15.93 0 5 10 15 20 25 30 35 2003-1 8 3 10 5 12 7 2 9 4 11 6 2010-1 8 3 10 5 12 7 Target Rate 12% Legal Rate 8%
  • 19. Low Household Leverage Source: CBRT, ECB (HouseholdLiabilities,%ofGDP,2012) 19 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 Turkish HHs do not have FX exposure
  • 20. Moderate Corporate Leverage 20 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, BRSA
  • 21. 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 21
  • 22. 9 30 0 5 10 15 20 25 30 35 2002 2012 Number of Products over $1 billion Diversified Product Bundle Source: TURKSTAT 22
  • 23. 0 10 20 30 40 50 60 70 80 01/2006 04/2006 07/2006 10/2006 01/2007 04/2007 07/2007 10/2007 01/2008 04/2008 07/2008 10/2008 01/2009 04/2009 07/2009 10/2009 01/2010 04/2010 07/2010 10/2010 01/2011 04/2011 07/2011 10/2011 01/2012 04/2012 07/2012 10/2012 01/2013 04/2013 07/2013 A Flexible Exchange Rate 23 Source: Bloomberg * Volatility is calculated using 30-day moving average. ** Emerging Markets include Brazil, Chile, Colombia, Czech Republic, Hungary, Indonesia, Malaysia, Mexico, Philippines, Poland, Romania, South Africa, Korea, and Turkey. Volatility* Emerging Economies** Turkey
  • 24. Financing of Growth in the Short-Term • Maintaining flows into equity & bond markets • Maintaining Long-Term financing • Increasing FDI Continuing to tap into global savings • Private Pension Scheme • Financing start-ups Boosting domestic savings
  • 25. Increasing Savings: Private Pensions 25% State Contribution Penalty for Early Withdrawals 25
  • 26. Incentives for Business Angels 26
  • 27. 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 27
  • 28. Incentives for Global Fund Managers A tax free environment for Global Funds Making it easier to manage assets in Turkey 28
  • 29. Sukuk Similar to eurobonds, internat’l holders aren’t subject to w/holding tax Sep-12: 1st Sukuk issued for $1.5bn in international market Oct-12: 2nd Sukuk denominated in TL issued for TL1.6bn Feb-13: 3rd Sukuk issued for TL1.5bn Aug-13: 4th Sukuk issued for TL1.8bn 29
  • 30. Long-Term Financing of Sustainable Growth 30
  • 31. Raising Domestics Savings 31
  • 32. -5 0 5 10 15 20 25 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Public Savings/GDP Private Savings/GDP (%) Source: Ministry of Development Savings 32
  • 33. Determinants of Savings Propensity to Save Deepening Capital Markets Increasing Energy Efficiency Productivity Moving Up the Value Chain Combatting Shadow Economy Income Ratios Improving Labor Market Flexibilty Demographics Enhancing Human Capital Stock
  • 34. 34 Enhancing Human Capital Stock
  • 35. Students (%, Total Population) 35 39 22 15 20 25 30 35 40 45 Turkey EU Source: TURKSTAT, Eurostat
  • 36. 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 36Source: Ministry of Development, Eurostat Population,million
  • 37. 9.4 17 8 10 12 14 16 18 2002 2013 Source: Ministry of Finance Share of Education Budget% 37
  • 38. Investment in Education Over the last decade, we have • Built 188,459 classrooms • Hired 395,144 teachers 38 Source: Ministry of Education
  • 39. 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 39
  • 40. Source: OECD, PISA 2009 PISA Results - Mathematics 43rd (among 65 countries) 40 445 350 375 400 425 450 475 500 525 550
  • 41. Source: OECD, PISA 2009 PISA Results - Science 43rd (among 65 countries) 41 454 350 370 390 410 430 450 470 490 510 530 550 Korea Estonia Germany Liechtenstein Slovenia Poland Hungary France İtaly Croatia Russia Greece Turkey Bulgaria Mexico Brazil Argentina Indonesia
  • 42. Improving Quality of Education With Fatih Project, we are providing our children with Broadband Internet Access Smart Boards Tablet PCs Other Information Technology Tools 42
  • 43. Source: OECD Fatih to help FURTHER reduce the Gap between Turkey & OECD (PISA Results) 43 30 40 50 60 70 80 science math 2006 2009
  • 44. Improving Labor Market Flexibility 44
  • 45. Labor Participation Rate is rising 51.0 45 46 47 48 49 50 51 52 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 LaborParticipationRate (%,s.a.) Source:TURKSTAT OECD Average: 70.9
  • 46. Low Employment Rate Early retirement Low rate of female labor force participation Rigidities in labor force market 46
  • 47. 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 47
  • 48. Labor Participation Rate, Female OECD Average: 62.3 Source: TURKSTAT, OECD 48 LaborParticipationRatebyEducation (2013June) 31.9 18.8 27.8 32.6 41.5 71.6 10 20 30 40 50 60 70 80 Total Illeterate Less than high school High school Vocational high school Higher education
  • 49. Improving Girls’ Education 2002 91.1 girls per 100 boys 2012 101.8 girls per 100 boys 49
  • 50. Source: OECD Highest among OECD countries 50 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 CzechRepublic Israel SlovakRepublic Poland Iceland Slovenia Hungary Portugal Chile Canada Estonia Spain France Austria Italy NewZealand Finland Luxembourg Belgium Sweden UnitedKingdom Australia Germany Switzerland Ireland Norway Denmark Netherlands Highest among OECD countries
  • 51. 51 Moving Up the Value Chain
  • 52. 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 52
  • 53. Source: The Scientific and Technological Council of Turkey R&D Spending 53 • 3.00%2023 • 0.86%2011 • 0.53%2002
  • 54. Industrial Design Applications 41,226 applications in 2012 Up by 103% since 2002 Source: TPI 54
  • 55. Trade Mark Applications Source: TPI • 36,578 2002 • 109,767 2012 55
  • 56. Patent Applications Source: TPI 56 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
  • 57. Combatting the Shadow Economy 57
  • 58. Informal Employment 58 52.1 51.7 50.1 48.2 47.0 45.4 43.5 43.8 43.3 42.1 39.0 37.8 35 37 39 41 43 45 47 49 51 53 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013June Source:TURKSTAT (%,TotalEmployment)
  • 59. 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 59 Down 6 percentage points
  • 60. 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 60 But still higher than EU average
  • 61. 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 61
  • 62. 62 Deepening Capital Markets
  • 63. 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 63
  • 64. Restructuring of Borsa Istanbul Regional Leadership Raising Market Cap/GDP to 80% 1,000 new companies to be listed 64
  • 65. Free-floats Most Turkish companies are privately owned Source: TSPAKB, CMB 70 30 10 20 30 40 50 60 70 80 EM Average Turkey %
  • 66. 66 Increasing Energy Efficiency
  • 67. Source: TURKSTAT, Bloomberg Energy Import Bill (Brent,$pbl) EnergyImports(BillionDollars) 67 9.2 60.1 57.9 0 20 40 60 80 100 120 0 10 20 30 40 50 60 70 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013July Energy Import Oil Prices
  • 68. High Dependence on Energy Imports 72% Total Energy 92% Oil 98% Natural-Gas 68
  • 69. 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 69
  • 70. Building the Nuclear Capacity 70 Akkuyu: JW with Russia Sinop JW with a Japanese-French consortium Working on a 3rd plant
  • 71. Improving Energy Efficiency 71 Industry 20% Transportation 15% Construction 30%
  • 72. Privatization • Distributions: Almost done 72 Hamitabat Termal Power Plant Seyitömer Termal Power Plant Kangal Termal Power Plant • Generation: 16,530MW on sale
  • 73. Determinants of Long-Term Growth Quality of Institutions Demographics Productivity 73
  • 74. 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 74
  • 75. 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 75
  • 76. 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 76
  • 77. How is Turkey Positioned? 77
  • 78. International Companies Operating in Turkey (1000s) Source: Ministry of Economy 78 5.6 6.7 8.8 11.7 15.0 16.1 19.2 21.9 25.2 29.6 33.8 34.5 0 5 10 15 20 25 30 35 40 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Jun
  • 79. Foreign Direct Investment Inflows Source: CBRT (Billiondollar) 14.8 122.8 0 20 40 60 80 100 120 140 1980-2002 2003-2012 79
  • 80. REER Appreciation Source: CBRT (2003=100) 80 55 65 75 85 95 105 115 125 135 1989-1 7 1990-1 7 1991-1 7 1992-1 7 1993-1 7 1994-1 7 1995-1 7 1996-1 7 1997-1 7 1998-1 7 1999-1 7 2000-1 7 2001-1 7 2002-1 7 2003-1 7 2004-1 7 2005-1 7 2006-1 7 2007-1 7 2008-1 7 2009-1 7 2010-1 7 2011-1 7 2012-1 7 2013-1 7 Linear Trend
  • 81. THANK YOU… 81

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