Turkish Economy: Past‐Present‐Future
Temasek
May 29, 2013
Mehmet Şimşek
Minister of Finance
Outline
End of Boom & Bust Cycles?
Reform Agenda
Outlook for 2013
Turkey’s Long‐Term Prospects
2
Moving towards a Stable Growth Story
3
From Boom‐Bust Cycles to Stable Growth
Source:TURKSTAT, MTP
‐8
‐6
‐4
‐2
0
2
4
6
8
10
12
14
1970
1971
1972
1973
1974
1975
1...
From Boom Bust Cycles to Stable Growth
Source:TURKSTAT, Medium‐Term Program
*GFC: Global Financial Crisis
3.7
5.1
3.1
6.9
...
6
End of  Boom & Bust Cycles
Post‐Crisis Recovery
Source: TURKSTAT
Real GDP  (s.a, 2002 Q4=100)
7
159.3
95
105
115
125
135
145
155
165
2002Q4
2003Q2
20...
How did we achieve it?
Price Stability
Fiscal Prudence
Healthy Banking 
Sector
A Macro‐
Prudential 
Framework
Quality of 
...
Price Stability
Source: TURKSTAT, Medium‐Term Program
9
(CPI Inflation, y/y, %)
107.2
125.5
99.1
6.2 5.3 5.0 5.0
0
20
40
6...
10.8
7.9
4.1
0.1
‐1.3
0.2
1.6
5.5
3.0
0.4
1.3 1.5 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...
74.0
67.7
59.6
52.7
46.5
39.9 40.0
46.1
42.3
39.1
36.1
35.0
33.0
31.0
30.0
35.0
40.0
45.0
50.0
55.0
60.0
65.0
70.0
75.0
20...
Banks are Solid & Profitable
* Latest data, monthly
Source: Banking Regulation and Supervision Agency,  IMF
Return on Equi...
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
...
Improving Quality of Institutions
14
Doing Business
Corruption
Perception Index
Global
Competitiveness
Index
Human
Develop...
C/A Deficit 
as a Source of
Vulnerability
Current Account Deficit is Large, but
(12 Month Rolling, USD bn)
Source: Central Bank of Turkey
Manageable
16
‐80
‐60
‐40
...
We are Building Reserves
17
(Bn$)
60
65
70
75
80
85
90
95
100
105
110
115
120
125
130
135
5/17/2007
8/17/2007
11/17/2007
2...
8
34
0
5
10
15
20
25
30
35
40
2002 2012
We have Diversified Export Markets
Number of Export Markets over $1 billion
Source...
Europe
56.6%
Other
43.4%
2002
Exports to Europe are on the Fall
Europe
38.8%
Other
61.2%
2012
Source: TURKSTAT
19
Source: TURKSTAT
Exports to MENA are on the Rise
Exports toMENA (%of Total)
20
12.1
31.6
5
10
15
20
25
30
35
2002 2012
9
30
0
5
10
15
20
25
30
35
2002 2012
Number of Products over $1 billion
We have Diversified Product Bundle
Source: TURKSTA...
(%)
10
12
14
16
18
20
22
24
26
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Current Account is a Structural Prob...
‐5
0
5
10
15
20
25
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Public Savings/GDP Private Savings/GDP
(%)
Sourc...
Reform Agenda
24
Chapter ‐ 1
Moving Up 
the Value 
Chain
Deepening 
Capital
Markets
Combatting 
the Shadow 
Economy
Improving 
Infrastructu...
26
Moving Up the Value Chain
Why is R&D so significant for us?
The share of high and medium‐high
technology sectors in production and in
export is low
...
Source: The Scientific and Technological Council of Turkey
R&D Spending
28
• 3.00%2023
• 0.86%2011
• 0.53%2002
Industrial Design Applications
41,226 applications in 2012
Up by 103% since 2002
Source: TPI
29
Trade Mark Applications
Source: TPI
• 36,578
2002
• 109,767
2012
30
Patent  Applications
Source: TPI
31
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
12,00...
32
Deepening Capital Markets
A New Capital Markets Law
•Increasing financial deepening & innovation
•Strengthening investor rights
•Improving corporate...
Restructuring of Borsa Istanbul
Regional 
Leadership
Raising 
Market 
Cap/GDP to
80%
1,000 new 
companies
to be listed
34
Increasing Savings: Private Pensions
25% State Contribution
Penalty for Early 
Withdrawals
35
Incentives for Global Fund Managers
A tax free environment for 
Global Funds
Making it easier to manage assets 
in Turkey
...
Incentives for Venture Capital
Allowing contributions to Venture Capital to be 
deducted from Corporate & Personal Income ...
Incentives for Business Angels
38
Developing Sukuk Market
Similar to euro bonds, international holders Sukuk will 
not be subject to withholding tax
Sep‐12:...
Combatting the Shadow Economy
40
Informal Employment
41
52.1 51.7
50.1
48.2
47.0
45.4
43.5 43.8
43.3
42.1
39.0
36.4
35
37
39
41
43
45
47
49
51
53
2002
2003...
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
2...
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...
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...
45
Improving Infrastructure
1,714 Km
Total of Motorways
4,387 Km
Total of State and 
Provincial Dual 
Carriageways 
Total: 6,101 Km
Dual Carriageway 
...
İSTANBUL
ESKİŞEHİR POLATLI
ANKARA
KONYA
SİVAS
212 km
533 km
405 km
YOZGAT
Yerköy
AFYON
İZMİR
MANİSA
624 km
BURSA
BİLECİK
1...
• The number of airports serving
scheduled flights = 262003
• The number of airports serving 
scheduled flights = 492012
A...
Chapter ‐ 2
Enhancing 
Human Capital 
Stock
Improving 
Labor Market 
Flexibility
Reducing 
Energy Import 
Bill
Reconciliat...
50
Enhancing Human Capital Stock
Students (%, Total Population)
51
39
22
15
20
25
30
35
40
45
Turkey EU
Source: TURKSTAT, Eurostat
21
0
10
20
30
40
50
60
70
80
90
Germany
France
United Kingdom
Italy
Spain
Poland
Romania
Turkey
Netherlands
Greece
Belgium...
9.4
17
8
10
12
14
16
18
2002 2013
Source: Ministry of Finance
Share of Education Budget%
53
Investment in Education
Over the last 
decade, we have
• Built 188,000 
classrooms
• Hired 357,000 teachers
54
Source: Min...
Gross Schooling Rates
Source: Ministry of Development
11.2
96.5
80.8
35.8
46.4
108.4
92.6
81.6
10
30
50
70
90
110
130
Pres...
Source: OECD, PISA 2009
PISA Results ‐ Mathematics
43rd (among 65 countries)
56
445
350
375
400
425
450
475
500
525
550
Source: OECD, PISA 2009
PISA Results ‐ Science
43rd (among 65 countries)
57
454
350
370
390
410
430
450
470
490
510
530
55...
Improving Quality of Education
With Fatih Project, we are providing our children with
Broadband Internet Access
Smart Boar...
Source: OECD
Fatih to help FURTHER reduce the Gap between Turkey & OECD
(PISA Results)
59
30
40
50
60
70
80
science math
2...
Improving Labor Market Flexibility
60
Low Employment Rate
Early retirement
Low rate of female labor 
force participation
Rigidities in labor force 
market 
61
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
62
Labor Participation Rate, Female
OECD Average: 62.3
Source: TURKSTAT, OECD
63
LaborParticipationRate byEducation
(2013  Fe...
Improving Girls’ Education
2002
91.1 girls per 
100 boys
2012
101.8 girls 
per 100 boys
64
Source: OECD
Highest among OECD countries
65
Average Usual Weekly Hours Worked on the Main Job
48.9
30
32
34
36
38
40
42
4...
66
Reducing Energy Import Bill
Source: TURKSTAT, Bloomberg
Energy Import Bill
(Brent, $ pbl)
Energy Imports (Billion Dollars)
67
9.2
60.1 58.7
23.4
110.5...
High Dependence on Energy Imports
72%
Total Energy
92%
Oil
98%
Natural‐Gas
68
Developing Local & Renewable Resources
Source: Ministry of Energy and Natural Resources
Electricity Generation Installed C...
Building the Nuclear Capacity
70
Akkuyu: 
JW with Russia
Sinop
JW with a Japanese‐French consortium
Working on a 3rd plant
Improving Energy Efficiency
71
Industry 
20%
Transportation 
15%
Construction 
30%
Privatization
• Distributions: Almost done
72
Hamitabat Termal Power Plant
Seyitömer Termal Power Plant
Kangal Termal Powe...
Coal
73
$12  Billion Investment
85 million tons of 
coal per year
45 billion kWh of 
energy per year
Employment for 15 
th...
74
Reconciliation Process
Lost Decades
75
About 40,000 deaths
About $350 billion spent on fighting 
terrorism
Indirect cost is more than $1 trillion
Lost Decades
OECD ülkeleri arasında en yüksek 
76
0
200
400
600
800
1000
1200
1400
1600
1800
2000 1980
1982
1984
1986
1988...
Instead of Money Spent on Fighting Terrorism, we 
could have… 
400,000 km 
dual 
carriageway
10,000 km 
high‐speed 
rail l...
Outlook for 2013
78
Outlook for 2013 and Onwards
Faster Growth
Slight Increase 
in C/A Deficit
Declining 
Inflation
Lower 
Unemployment
79
Fal...
Faster Growth
80
Real GDP  (2007=100)
Source: Eurostat, IMF, Medum‐Term Program
133.3
100.9
111.8
90
95
100
105
110
115
12...
Real Economic Activity Indicators
Source: CBRT, HSBC, TURKSTAT
81
80
85
90
95
100
105
110
115
120
30
35
40
45
50
55
60
200...
Confidence Indices
Source: CBRT, TURKSTAT
82
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
2...
( %)
83
Looser Monetary Policy
Source: CBRT
3.5
6.5
4.5
3
5
7
9
11
13
15
October 11
October 11
December 11
December 11
Jan...
( %)
84
Source: CBRT
Falling Lending Rates
8
10
12
14
16
18
20
22
24
26
28 1/4/2008
4/4/2008
7/4/2008
10/4/2008
1/4/2009
4...
85
28.3
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.
M...
86
Employment is Supportive of GrowthEmployment  since end‐2007 
(MnPeople, s.a.)
Source:TURKSTAT
25.6
20
21
22
23
24
25
2...
Well‐Capitalized Banking SectorCapital Adequacy Ratio, %
Target Rate 12% 
Legal Rate 8% 
Source: BRSA
87
Capital adequacy ...
Low Household Leverage
Source: CBRT, ECB
(Household Liabilities, % of GDP, 2012 Q3)
88
65.7
20.3
0 20 40 60 80 100 120 140...
Moderate Corporate Liabilities
89
36.8
0 20 40 60 80 100 120
Luxembourg
Spain
Portugal
Netherlands
Ireland
Denmark
Italy
S...
Other Factors Supporting Growth
Urban Renewal 2B Removal of 
Reciprocity
Incentives IG Credit Ratings
Reconciliation
Proce...
Turkey’s Strong Long‐Term Prospects
91
GDP
Source: TURKSTAT, Medium‐Term Program,PwC
2002
2050
2002
$ 230 
billion
2050
$ 5 trillion
2012
$ 786 billion
2023
$ 2 ...
GDP per Capita
Source: TURKSTAT, Medium‐Term Program,PwC
2002
2050
2002
$ 3,492
2012
$10,504
2023 
$ 25,000
2050
$ 50,000
...
Determinants of Long‐Term Growth
Quality of Institutions
Demographics
Productivity
94
Favorable Demographics
Source: Eurostat
Share of 15‐24 years old in Total Pop. (%)
16.8
7 9 11 13 15 17 19 21
Andorra
Ital...
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
Annual Average Population Growth Rate 
(%, 2...
Have Investors noticed the 
Transformation?
97
International Companies Operating in Turkey 
(1000s)
Source: Ministry of Economy
98
5.6
6.7
8.8
11.7
15.0
16.1
19.2
21.9
2...
Foreign Direct Investment Inflows
Source: CBRT
(Billion dollar)
14.8
122.8
0
20
40
60
80
100
120
140
1980‐2002 2003‐2012
99
REER Appreciation
Source: CBRT
(2003=100)
100
55
65
75
85
95
105
115
125
135 1989‐1
7
1990‐1
7
1991‐1
7
1992‐1
7
1993‐1
7
...
THANK YOU…
101
Upcoming SlideShare
Loading in …5
×

Temasek 2013 v5 29.05.2013

261 views
220 views

Published on

Published in: Business, Economy & Finance
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
261
On SlideShare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
0
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Temasek 2013 v5 29.05.2013

  1. 1. Turkish Economy: Past‐Present‐Future Temasek May 29, 2013 Mehmet Şimşek Minister of Finance
  2. 2. Outline End of Boom & Bust Cycles? Reform Agenda Outlook for 2013 Turkey’s Long‐Term Prospects 2
  3. 3. Moving towards a Stable Growth Story 3
  4. 4. From Boom‐Bust Cycles to Stable Growth Source:TURKSTAT, MTP ‐8 ‐6 ‐4 ‐2 0 2 4 6 8 10 12 14 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Global Financial Crisis
  5. 5. From Boom Bust Cycles to Stable Growth Source:TURKSTAT, Medium‐Term Program *GFC: Global Financial Crisis 3.7 5.1 3.1 6.9 3.2 5.0 6.0 4.0 5.1  3.0  3.5  4.0  4.5  5.0  5.5  6.0  6.5  7.0  7.5 1973‐1982 1983‐1992 1993‐2002 Pre‐GFC (2003‐07) Post‐GFC (2008‐12) Medium‐Term (2013‐15) Long‐Term (2016‐23) Pre‐AK Party AK Party
  6. 6. 6 End of  Boom & Bust Cycles
  7. 7. Post‐Crisis Recovery Source: TURKSTAT Real GDP  (s.a, 2002 Q4=100) 7 159.3 95 105 115 125 135 145 155 165 2002Q4 2003Q2 2003Q4 2004Q2 2004Q4 2005Q2 2005Q4 2006Q2 2006Q4 2007Q2 2007Q4 2008Q2 2008Q4 2009Q2 2009Q4 2010Q2 2010Q4 2011Q2 2011Q4 2012Q2 2012Q4
  8. 8. How did we achieve it? Price Stability Fiscal Prudence Healthy Banking  Sector A Macro‐ Prudential  Framework Quality of  Institutions
  9. 9. Price Stability Source: TURKSTAT, Medium‐Term Program 9 (CPI Inflation, y/y, %) 107.2 125.5 99.1 6.2 5.3 5.0 5.0 0 20 40 60 80 100 120 140 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Forecast
  10. 10. 10.8 7.9 4.1 0.1 ‐1.3 0.2 1.6 5.5 3.0 0.4 1.3 1.5 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 Budget Deficit‐to‐GDP, % 10 Strengthened Fiscal Position
  11. 11. 74.0 67.7 59.6 52.7 46.5 39.9 40.0 46.1 42.3 39.1 36.1 35.0 33.0 31.0 30.0 35.0 40.0 45.0 50.0 55.0 60.0 65.0 70.0 75.0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Medium‐Term Program  (2013‐15) Lowered Public Debt Debt‐to‐GDP, % Satisfying Maastricht Criteria since 2004 Maastricht Criteria:  60% Source: Treasury 11
  12. 12. Banks are Solid & Profitable * Latest data, monthly Source: Banking Regulation and Supervision Agency,  IMF Return on Equity* (%) 12 17.9 ‐40 ‐30 ‐20 ‐10 0 10 20 30 Canada Australia Czech Republic TURKEY Brazil Finland Germany United States France Japan Austria Spain Netherlands United Kingdom Denmark Portugal Belgium Italy Greece 2002 2013‐1 17.6 2.9 NPL Ratioof Loans(%)
  13. 13. 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 Flexible Exchange Rate 13 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
  14. 14. Improving Quality of Institutions 14 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
  15. 15. C/A Deficit  as a Source of Vulnerability
  16. 16. Current Account Deficit is Large, but (12 Month Rolling, USD bn) Source: Central Bank of Turkey Manageable 16 ‐80 ‐60 ‐40 ‐20 0 20 40 2002‐1 4 7 10 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 Current Account Current Account without Energy Import Current Account + Net FDI + Net Errors and Omissions
  17. 17. We are Building Reserves 17 (Bn$) 60 65 70 75 80 85 90 95 100 105 110 115 120 125 130 135 5/17/2007 8/17/2007 11/17/2007 2/17/2008 5/17/2008 8/17/2008 11/17/2008 2/17/2009 5/17/2009 8/17/2009 11/17/2009 2/17/2010 5/17/2010 8/17/2010 11/17/2010 2/17/2011 5/17/2011 8/17/2011 11/17/2011 2/17/2012 5/17/2012 8/17/2012 11/17/2012 2/17/2013 5/17/2013
  18. 18. 8 34 0 5 10 15 20 25 30 35 40 2002 2012 We have Diversified Export Markets Number of Export Markets over $1 billion Source: TURKSTAT 18
  19. 19. Europe 56.6% Other 43.4% 2002 Exports to Europe are on the Fall Europe 38.8% Other 61.2% 2012 Source: TURKSTAT 19
  20. 20. Source: TURKSTAT Exports to MENA are on the Rise Exports toMENA (%of Total) 20 12.1 31.6 5 10 15 20 25 30 35 2002 2012
  21. 21. 9 30 0 5 10 15 20 25 30 35 2002 2012 Number of Products over $1 billion We have Diversified Product Bundle Source: TURKSTAT 21
  22. 22. (%) 10 12 14 16 18 20 22 24 26 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Current Account is a Structural Problem Source: Ministry of Development 22
  23. 23. ‐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 23
  24. 24. Reform Agenda 24
  25. 25. Chapter ‐ 1 Moving Up  the Value  Chain Deepening  Capital Markets Combatting  the Shadow  Economy Improving  Infrastructure
  26. 26. 26 Moving Up the Value Chain
  27. 27. 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 27
  28. 28. Source: The Scientific and Technological Council of Turkey R&D Spending 28 • 3.00%2023 • 0.86%2011 • 0.53%2002
  29. 29. Industrial Design Applications 41,226 applications in 2012 Up by 103% since 2002 Source: TPI 29
  30. 30. Trade Mark Applications Source: TPI • 36,578 2002 • 109,767 2012 30
  31. 31. Patent  Applications Source: TPI 31 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
  32. 32. 32 Deepening Capital Markets
  33. 33. 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 33
  34. 34. Restructuring of Borsa Istanbul Regional  Leadership Raising  Market  Cap/GDP to 80% 1,000 new  companies to be listed 34
  35. 35. Increasing Savings: Private Pensions 25% State Contribution Penalty for Early  Withdrawals 35
  36. 36. Incentives for Global Fund Managers A tax free environment for  Global Funds Making it easier to manage assets  in Turkey 36
  37. 37. 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 37
  38. 38. Incentives for Business Angels 38
  39. 39. Developing Sukuk Market 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   39
  40. 40. Combatting the Shadow Economy 40
  41. 41. Informal Employment 41 52.1 51.7 50.1 48.2 47.0 45.4 43.5 43.8 43.3 42.1 39.0 36.4 35 37 39 41 43 45 47 49 51 53 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 February Source:TURKSTAT (%, Total Employment)
  42. 42. 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 42 Down 6 percentage points
  43. 43. 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 Czech Rep. Slovak Rep. Sweeden Norway Denmark Finland Germany Ireland France UK Netherland Luxemburg Austria Switzerland Source: Schneider, 2013 43 But still higher than EU average
  44. 44. 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 44
  45. 45. 45 Improving Infrastructure
  46. 46. 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 20,017Km Total of State and  Provincial Dual  Carriageways Total: 22,261 Km Dual Carriageway  Network (May 11, 2013) 46
  47. 47. İSTANBUL ESKİŞEHİR POLATLI ANKARA KONYA SİVAS 212 km 533 km 405 km YOZGAT Yerköy AFYON İZMİR MANİSA 624 km BURSA BİLECİK 105 km Under Construction Completed High Speed Railway Projects 47Source: Ministry of Transport  
  48. 48. • The number of airports serving scheduled flights = 262003 • The number of airports serving  scheduled flights = 492012 Airports Available For Civil Aviation Traffic in  Turkey Airports serving Scheduled  Flights (49) Airports under Construction (6) Airports Planned (1) 48
  49. 49. Chapter ‐ 2 Enhancing  Human Capital  Stock Improving  Labor Market  Flexibility Reducing  Energy Import  Bill Reconciliation  Process
  50. 50. 50 Enhancing Human Capital Stock
  51. 51. Students (%, Total Population) 51 39 22 15 20 25 30 35 40 45 Turkey EU Source: TURKSTAT, Eurostat
  52. 52. 21 0 10 20 30 40 50 60 70 80 90 Germany France United Kingdom Italy Spain Poland Romania Turkey Netherlands Greece Belgium Portugal Czech Republic 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 52Source: Ministry of Development, Eurostat Population, million
  53. 53. 9.4 17 8 10 12 14 16 18 2002 2013 Source: Ministry of Finance Share of Education Budget% 53
  54. 54. Investment in Education Over the last  decade, we have • Built 188,000  classrooms • Hired 357,000 teachers 54 Source: Ministry of Education
  55. 55. Gross Schooling Rates Source: Ministry of Development 11.2 96.5 80.8 35.8 46.4 108.4 92.6 81.6 10 30 50 70 90 110 130 Preschool (age of 4‐5 ) Primary School Secondary School Higher Education 2002‐2003 2011‐2012 55
  56. 56. Source: OECD, PISA 2009 PISA Results ‐ Mathematics 43rd (among 65 countries) 56 445 350 375 400 425 450 475 500 525 550
  57. 57. Source: OECD, PISA 2009 PISA Results ‐ Science 43rd (among 65 countries) 57 454 350 370 390 410 430 450 470 490 510 530 550 Korea Estonia Germany Liechtenstein Slovenia Poland Hungary France İtaly Croatia Russia Greece Turkey Bulgaria Mexico Brazil Argentina Indonesia
  58. 58. Improving Quality of Education With Fatih Project, we are providing our children with Broadband Internet Access Smart Boards Tablet PCs Other Information Technology Tools 58
  59. 59. Source: OECD Fatih to help FURTHER reduce the Gap between Turkey & OECD (PISA Results) 59 30 40 50 60 70 80 science math 2006 2009
  60. 60. Improving Labor Market Flexibility 60
  61. 61. Low Employment Rate Early retirement Low rate of female labor  force participation Rigidities in labor force  market  61
  62. 62. 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 62
  63. 63. Labor Participation Rate, Female OECD Average: 62.3 Source: TURKSTAT, OECD 63 LaborParticipationRate byEducation (2013  February) 29.6 16.1 24.8 32.1 39.4 73.0 10 20 30 40 50 60 70 80 Total Illeterate Less than high school High school Vocational high school Higher education
  64. 64. Improving Girls’ Education 2002 91.1 girls per  100 boys 2012 101.8 girls  per 100 boys 64
  65. 65. Source: OECD Highest among OECD countries 65 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 Republic Israel Slovak Republic Poland Iceland Slovenia Hungary Portugal Chile Canada Estonia Spain France Austria Italy New Zealand Finland Luxembourg Belgium Sweden United Kingdom Australia Germany Switzerland Ireland Norway Denmark Netherlands Highest among OECD countries
  66. 66. 66 Reducing Energy Import Bill
  67. 67. Source: TURKSTAT, Bloomberg Energy Import Bill (Brent, $ pbl) Energy Imports (Billion Dollars) 67 9.2 60.1 58.7 23.4 110.5 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 2013Q1 Energy Import Oil Prices
  68. 68. High Dependence on Energy Imports 72% Total Energy 92% Oil 98% Natural‐Gas 68
  69. 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. 70. Building the Nuclear Capacity 70 Akkuyu:  JW with Russia Sinop JW with a Japanese‐French consortium Working on a 3rd plant
  71. 71. Improving Energy Efficiency 71 Industry  20% Transportation  15% Construction  30%
  72. 72. Privatization • Distributions: Almost done 72 Hamitabat Termal Power Plant Seyitömer Termal Power Plant Kangal Termal Power Plant • Generation: 16,530MW on sale
  73. 73. Coal 73 $12  Billion Investment 85 million tons of  coal per year 45 billion kWh of  energy per year Employment for 15  thousand people Turkey‐UAE
  74. 74. 74 Reconciliation Process
  75. 75. Lost Decades 75 About 40,000 deaths About $350 billion spent on fighting  terrorism Indirect cost is more than $1 trillion
  76. 76. Lost Decades OECD ülkeleri arasında en yüksek  76 0 200 400 600 800 1000 1200 1400 1600 1800 2000 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Korea Turkey 80s: at par w/ Korea 90s: Lost Decade AK Party: Rapid Growth GDP, million $ Source: IMF
  77. 77. Instead of Money Spent on Fighting Terrorism, we  could have…  400,000 km  dual  carriageway 10,000 km  high‐speed  rail line 3,000,000 classrooms 77
  78. 78. Outlook for 2013 78
  79. 79. Outlook for 2013 and Onwards Faster Growth Slight Increase  in C/A Deficit Declining  Inflation Lower  Unemployment 79 Falling  Debt &  Deficit
  80. 80. Faster Growth 80 Real GDP  (2007=100) Source: Eurostat, IMF, Medum‐Term Program 133.3 100.9 111.8 90 95 100 105 110 115 120 125 130 135 140 2007 2008 2009 2010 2011 2012 2013 2014 2015 Turkey Euro USA Forecast
  81. 81. Real Economic Activity Indicators Source: CBRT, HSBC, TURKSTAT 81 80 85 90 95 100 105 110 115 120 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 PMI (Left) Manufacturing Index (s.a.) (Right)
  82. 82. Confidence Indices Source: CBRT, TURKSTAT 82 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 Real Sector Confidence Index (Left) Consumer Confidence Index (Right)
  83. 83. ( %) 83 Looser Monetary Policy Source: CBRT 3.5 6.5 4.5 3 5 7 9 11 13 15 October 11 October 11 December 11 December 11 January 12 February 12 March 12 April 12 May 12 Jun 12 July 12 August 12 September 12 October 12 November 12 December 12 January 13 February 13 March 13 April 13 May 13 CBRT Funding Rate O/N Borrowing O/N Lending Policy Rate
  84. 84. ( %) 84 Source: CBRT Falling Lending Rates 8 10 12 14 16 18 20 22 24 26 28 1/4/2008 4/4/2008 7/4/2008 10/4/2008 1/4/2009 4/4/2009 7/4/2009 10/4/2009 1/4/2010 4/4/2010 7/4/2010 10/4/2010 1/4/2011 4/4/2011 7/4/2011 10/4/2011 1/4/2012 4/4/2012 7/4/2012 10/4/2012 1/4/2013 4/4/2013 Personal Vehicle Housing Commercial
  85. 85. 85 28.3 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 * Credit Growth is adjusted for exchange rate movements Source: CBRT Strong Credit Growth13 week moving avg., y‐on‐y %
  86. 86. 86 Employment is Supportive of GrowthEmployment  since end‐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
  87. 87. Well‐Capitalized Banking SectorCapital Adequacy Ratio, % Target Rate 12%  Legal Rate 8%  Source: BRSA 87 Capital adequacy ratio twice the  minimum legal limit of 8%. 17.42 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
  88. 88. Low Household Leverage Source: CBRT, ECB (Household Liabilities, % of GDP, 2012 Q3) 88 65.7 20.3 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 Hungary Czech Republic Slovenia Slovakia Lithuania Turkey
  89. 89. Moderate Corporate Liabilities 89 36.8 0 20 40 60 80 100 120 Luxembourg Spain Portugal Netherlands Ireland Denmark Italy Slovenia Austria Sweden Greece France Latvia Estonia Turkey Germany Finland Belgium United Kingdom Hungary Lithuania Slovakia Czech Republic Poland (Corporateliabilities, %,  GDP) Source: CBRT, Cetinkaya, March 2013, BRSA
  90. 90. Other Factors Supporting Growth Urban Renewal 2B Removal of  Reciprocity Incentives IG Credit Ratings Reconciliation Process 90
  91. 91. Turkey’s Strong Long‐Term Prospects 91
  92. 92. GDP Source: TURKSTAT, Medium‐Term Program,PwC 2002 2050 2002 $ 230  billion 2050 $ 5 trillion 2012 $ 786 billion 2023 $ 2 trillion 92
  93. 93. GDP per Capita Source: TURKSTAT, Medium‐Term Program,PwC 2002 2050 2002 $ 3,492 2012 $10,504 2023  $ 25,000 2050 $ 50,000 93
  94. 94. Determinants of Long‐Term Growth Quality of Institutions Demographics Productivity 94
  95. 95. Favorable Demographics Source: Eurostat Share of 15‐24 years old in Total Pop. (%) 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. 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 Annual Average Population Growth Rate  (%, 2001‐11)Growth Rate of Working‐Age Population Source: OECD, Eurostat, TURKSTAT 96
  97. 97. Have Investors noticed the  Transformation? 97
  98. 98. International Companies Operating in Turkey  (1000s) Source: Ministry of Economy 98 5.6 6.7 8.8 11.7 15.0 16.1 19.2 21.9 25.2 29.5 33.1 33.5 0 5 10 15 20 25 30 35 40 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Mar
  99. 99. Foreign Direct Investment Inflows Source: CBRT (Billion dollar) 14.8 122.8 0 20 40 60 80 100 120 140 1980‐2002 2003‐2012 99
  100. 100. REER Appreciation Source: CBRT (2003=100) 100 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 Linear Trend
  101. 101. THANK YOU… 101

×