Turkey's Economic and Political Outlook (Kuwait)
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  •  
  •  Turkey ranked 65th out of 102 countries in 2002 whereas it became 53rd among 177 countries in 2013.
  • Turkey ranked 65th out of 102 countries in 2002 whereas it became 53rd among 177 countries in 2013.
  • While Turkey ranked 71st out of 125 countries in the Global Competitiveness Index in 2005, it has become 44thamong 148 countries in the period of 2012-2013.
  • While Turkey wasranked 71st out of 125 countries in the Global Competitiveness Index in 2005, it has become 44thamong 148 countries in 2013.  
  • While Turkey wasranked 84th among 175 countries in 2006, it has become 69thamong 189 countries in 2013.  
  • While Turkey wasranked 84th among 175 countries in 2006, it has become 69thamong 189 countries in 2013-14.  

Transcript

  • 1. Turkey’s Economic & Political Outlook April 2, 2014 Mehmet Şimşek Minister of Finance 1
  • 2. Economic & Political Outlook Structural Reforms & Priorities Long-Term Prospects Outline 2
  • 3. 3 Political Outlook: Is Political Stability at Stake?
  • 4. Local Election Results Source: Anadolu Agency AK PARTY: Justice and Development Party CHP: Republican People’s Party MHP: Nationalist Movement Party BDP: Peace and Democracy Party (%) 45.6 27.9 15.2 4.0 7.3 38.8 23.1 16.1 5.7 16.3 0 10 20 30 40 50 AK PARTY CHP MHP BDP Others 2014 2009
  • 5. 2 More Elections Ahead Presidential • August 2014 Parliamentary • June 2015 5
  • 6. 6 Economic Fallout from Political Uncertainty?
  • 7. 7 Growth
  • 8. ‹#›
  • 9. 9 Upside • Stronger external demand • EU pulling out of recession • Arab Spring becoming less disruptive • TL Depreciation Downside • Political uncertainty • Tighter financial conditions Growth Outlook
  • 10. Employment, Unemployment & Labor ParticipationEmploymentsince2007(mnpeoples.a.) Source:TURKSTAT 25.8 20 21 22 23 24 25 26 27 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 45 46 47 48 49 50 51 52 8 9 10 11 12 13 14 15 16 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Unemploymen Rate (Left Axis) Labor Force Participation Rate (Right Axis) (s.a.,%) (s.a.,%) 10
  • 11. 11 Growth
  • 12. Inflation 0 20 40 60 80 100 120 140 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 Source: TURKSTAT (CPI,Annual,%) 12
  • 13. 13 Upside • TL Depreciation Downside • Monetary Tightening • Widening Output Gap • Benign Commodity Prices Inflation Outlook
  • 14. (%) 14 Tightening Monetary Policy Source: CBRT 8.00 12.00 10.00 3 5 7 9 11 13 15 Oct-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 CBRT Funding Rate O/N Borrowing O/N Lending Policy Rate
  • 15. 15 Fiscal Outlook: Room to Manoeuvre
  • 16. 10.8 7.9 4.1 0.1 -1.3 0.2 1.6 5.5 3.0 0.4 1.0 1.0 1.1 -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 Maastricht Criteria: 3% Achieved Maastricht Criteria except 2009 Source: Ministry of Development BudgetDeficit-to-GDP,% 16 Low Deficit
  • 17. Budget Deficit (2014) 17 BudgetDeficit-to-GDP,% Source: IMF, OECD, Ministry of Development 4.0 2.9 2.2 1.1 0.5 1 1.5 2 2.5 3 3.5 4 4.5 OECD EU-27 EMs Turkey
  • 18. Source: IMF Fiscal Strength in EMs Arm Br Bul Col Cro Fr Hun Indo Ire Latv Lith MexPhil Pol Rom Rus Serb Slvk Slov SoAf Sp Tu 0 20 40 60 80 100 120 140 0 1 2 3 4 5 6 7 GrossDebt/GDP(%) Fiscal Deficit /GDP (%)
  • 19. 19 Upside • Recent tax measures Downside • Weakening domestic demand Fiscal Outlook
  • 20. 74.0 67.7 59.6 52.7 46.5 39.9 40.0 46.1 42.3 39.1 36.2 36.3 33.0 25 30 35 40 45 50 55 60 65 70 75 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Lower Public Debt Debt-to-GDP,% Satisfying Maastricht Criteria since 2004 Maastricht Criteria: 60% Source: Treasury 20
  • 21. Public Debt (2014) Source: IMF, OECD, Treasury 21 Debt-to-GDP,% 111.8 90.0 33.7 33.0 20 30 40 50 60 70 80 90 100 110 120 OECD EU EMs Turkey
  • 22. 22 (%) Interest Payments 85.7 14.9 43.2 11.9 0 10 20 30 40 50 60 70 80 90 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Interest Payments/Tax Revenues Interest Payments/Budget Expenditures Source: Ministry of Finance
  • 23. 23 Turkey’s Soft Spot
  • 24. Current Account Deficit 24 (%ofGDP) Net Gold Exports • 2011: -$4.8 billion • 2012: +$5.7 billion • 2013: -$11.8 billion Source: CBRT
  • 25. Factors behind high C/A Deficit (2011-13) Strong domestic demand Euro crisis Energy prices Arab Spring 25
  • 26. Outlook for C/A Deficit 26 • Europe pulling out of recession • Softening domestic demand • Exchange rate weakness • Relatively more stable MENA region • Gold imports likely to fall • Higher tourism revenues Significant adjustment is likely
  • 27. Financial Stability & Turkey’s FX Risk? 27
  • 28. Turkey's FX Position Source: CBRT, BRSA, Treasury * Assets: CBRT FX Deposits of Treasury+ CBRT Foreign Assets; Liabilities= Public gross external debt+CBRT Liabilities to Non Residents. Data from CBT dated Mar. 24, 2014; data from gross external debt stock as of Q3-13 ** Data - Jan. 2014 *** Data - Dec. 2013 **** Data - Mar. 2013 *****Data-21.03.2014 28 Billion $ Assets Liabilities Net Position Public* 133,4 118,9 14,6 Banking Sector** 482,1 482,6 -0,5 Real Sector*** 92,2 266,1 -173,9 Short Term 76,9 94,9 -18 Household**** 191,0 0,5 190,5 FX Deposit ***** 81,7
  • 29. FX Loans: All Firms 29 Source: CBRT No FX Loans 63% FX Loan w/ export earning 25% FX Loan w/o export earning 12% 9,500 firms Total net sales at 71% of GDP.
  • 30. Banks: Safe & Sound 30 CapitalAdequacyRatio,% 2002 Jan-14 17.6 2.7 NPLRatioofLoans(%) 15.1 0 5 10 15 20 25 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 Legal Rate: %8 Target Rate 12% Source: BRSA
  • 31. Households: Low Leverage Source: CBRT, ECB (HouseholdLiabilities,%ofGDP,June2013) 31 No FX exposure 65 23 20 40 60 80 100 120 140 Denmark Netherlands Ireland United Kingdom Portugal Sweden Spain Finland Euro Area Greece Malta Germany France Luxembourg Belgium Austria Italy Estonia Poland Czech Republic Latvia Slovenia Hungary Slovakia Lithuania Turkey
  • 32. Priorities & Structural Reforms 32
  • 33. Chapter- 1 Moving up the Value- Chain Deepening Capital Markets Combatting Shadow Economy Improving Infrastructure 33
  • 34. Moving up the Value-Chain 34
  • 35. High Added Value in Exports Strengthening the link b/w commerce and R&D Value of export products per kg Turkey $1.58 South Korea $3.0 Turquality $3.28 Japan $3.5 Germany $4.1 35
  • 36. Source: The Scientific and Technological Council of Turkey R&D Spending •3.00%2023 •1.8%2018 • 0.92%2012 • 0.53%2002 36
  • 37. Industrial Design Applications 45,091 applications in 2013 Up by 122% since 2002 Source: TPI 37
  • 38. Trade Mark Applications 38 (2012,Thousand) 108* 86 64 54 44 41 17 16 14 14 0 20 40 60 80 100 120 TURKEY France Germany Italy Spain UK Portugal Switzerlan d Norway Poland Source: TPI *Turkey’s 2013 data
  • 39. Patent Applications Source: TPI 1,874 12,053 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 11,000 12,000 13,000 2002 2013 39
  • 40. Deepening Capital Markets 40
  • 41. Deepening Capital Markets New Capital Markets Law Restructuring of Borsa Istanbul Incentives for Private Pensions 41
  • 42. 2009 72nd 2014 47th 2018 25th Global Financial Centres Index Source: Global Financial Centres Index 15 45 47 60 63 70 75 77 20 30 40 50 60 70 80 Rio de Jeneiro ISTANBUL Warsaw Mauritius Mexico Prague Budapest 42
  • 43. Combatting Shadow Economy 43
  • 44. 44 52.1 51.7 50.1 48.2 47.0 45.4 43.5 43.8 43.3 42.1 39.0 36.7 30 35 40 45 50 55 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 InformalEmployment(%ofTotalEmployment) Informal Employment Source:TURKSTAT
  • 45. 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 45
  • 46. Size of Shadow Economy (%, GDP) Source: Schneider, 2013 But still higher than EU average 46 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 19.0 18.6 18.4 16.4 15.5 15.0 13.9 13.6 13.0 13.0 13.0 12.2 9.9 9.7 9.1 8.0 7.5 5 10 15 20 25 30 35 Bulgaria Romania Crotia Latvia Estonia TURKEY Lithuania S.Cyprus Malta Poland Greece Slovenia Hungary Italy Portugal Spain EUAverage Belgium CzechRep. Slovakia Sweeden Norway Denmark Finland Germany Ireland France UnitedKingdom Netherlands Luxemburg Austria SizeofInformalEconomy(2013,%,GDP)
  • 47. Improving Infrastructure 47
  • 48. 1,714 Km Total of Motorways 4,387 Km Total of State and Provincial Dual Carriageways Total: 6,101 Km January 2003 2,244 Km Total of Motorways 20,807 Km Total of State and Provincial Dual Carriageways Total: 23,051 Km January 2014 48
  • 49. İSTANBUL EDİRNE ESKİŞEHİR Polatlı ANKARA KONYA İZMİR SİVAS AFYONKARHİSAR KAYSERİ BURSA ERZİNCAN ERZURUM KARS MERSİN ADANA DİYARBAKIR ELAZIĞ MALATYA ZONGULDAK SAMSUN Bandırma VAN MUŞ BİLECİK ÇANKIRI KIRIKKALE TEKİRDAĞ İZMİT BALIKESİR AYDIN DENİZLİ BURDUR ISPARTA UŞAK MANİSA KARAMAN NİĞDE OSMANİYE K.MARAŞ AMASYA BATMAN MARDİN Yerköy KARABÜK Yenişehir Constructed (1.724 km) Under Construction (2.500 km) Bidding Phase (1.600 km) GAZİANTEP Çobanbey 1,724 km of railroad constructed since 2003 o.w. 1,366 km High Speed Train Lines 49 High Speed Railway Projects
  • 50. • The number of airports serving scheduled flights = 262003 • The number of airports serving scheduled flights = 522013 Active Airports in Turkey Airports serving Scheduled Flights (52) Airports under Construction (3) Airports Planned (1) 50
  • 51. Chapter- 2 Enhancing Human Capital Stock Increasing Labor Market Flexibility Reducing Energy Import Bill Reducing Regional Development Gaps 51
  • 52. Enhancing Human Capital Stock 52
  • 53. Students (%, Total Population) 53 39 22 15 20 25 30 35 40 45 Turkey EU Source: TURKSTAT, Eurostat Included Informal Education
  • 54. 9.4 18 8 10 12 14 16 18 2002 2014 Source: Ministry of Finance Share of Education in Budget% 54
  • 55. Investment in Education Over the last decade, we have • Built 205,000 classrooms • Hired 410,000 teachers Source: Ministry of Education 55
  • 56. Gross Schooling Rates Source: Ministry of Development 56
  • 57. 12 Years of Mandatory Education 57 Austral. Austria Belg. Canada Chile Czech R. Den. Estonia Finland France Italy Japan Lux Mex New Zeal. Poland Port. Spain Switz. TURKEY UK USA 6 8 10 12 14 16 18 9.5 29.5 49.5 69.5 89.5 109.5 129.5 AverageYearsatSchoolofPop’nover25Years Income per Capita (PPP, log) Source: OECD
  • 58. 2002 91,1 girls per 100 boys 2012 101,8 girls per 100 boys 58 Improving Girls’ Education
  • 59. 59Source: OECD 76 74 47 51 38 46 30 35 40 45 50 55 60 65 70 75 80 Science Math 2006 2009 2012 Enhancing Human Capital Stock: PISA Results, Gap b/w Turkey & OECD
  • 60. Healthcare 60
  • 61. Healthcare Expenditures Source: The Ministry of Finance 61
  • 62. Healthcare Indicators Source: The Ministry of Health 62 (Years) 72 77 70 72 74 76 78 2002 2013 Life Expectancy At Birth Infant and Maternal Mortality Rate (perthousand) (pertenthousand) 31.5 7.4 6.4 1.5 0 1 2 3 4 5 6 7 0 5 10 15 20 25 30 35 2002 2013 Infant Mortality Rate (Left Axis) Maternal Mortality Rate (Right Axis)
  • 63. Healthcare Indicators Source: TURKSTAT 39.5 74.7 30 40 50 60 70 80 2003 2013 (%) Patient Satisfaction with Healthcare Services 63
  • 64. Tax Incentives for Medical Service Exports 50% tax relief on CIT & PIT And • VAT down to 8% from 18% • PIT and CIT exemption for 5 years • Regional Investment Incentives 64
  • 65. PPP in Healthcare 65 Projects at Funding Phase • Kayseri • Ankara Etlik • Ankara Bilkent • İkitelli • Elazığ • Yozgat • Manisa • Adana • Mersin • Gaziantep • National Public Health Agency Projects at Funding Phase worth almost $6bn Projects at Tendering & Contract Phase • Isparta • Kocaeli • Eskişehir • Bursa • Konya Karatay • İzmir Bayraklı • İstanbul Bakırköy • İstanbul Üsküdar
  • 66. Increasing Labor Market Flexibility 66
  • 67. Average Retirement Age 41.0 44.9 61.9 63.3 30 35 40 45 50 55 60 65 Female Male Turkey OECD Source: OECD 67
  • 68. Labor Participation Rate, Female Source: Fraker, A. and D. Ozdemir, 2011, “Female Labor Force Participation How Does Turkey Compare?”, TEPAV 68 FemaleLaborParticipationRate(%) Income per Capita (log)
  • 69. 69 Average Usual Weekly Hours Worked on the Main Job 48.9 30 32 34 36 38 40 42 44 46 48 50 Turkey Korea Mexico Greece CzechRepublic Israel SlovakRepublic Poland Iceland Slovenia Hungary Portugal Chile Canada Estonia Spain France Austria Italy NewZealand Finland Luxembourg Belgium Sweden United… Australia Germany Switzerland Ireland Norway Denmark Netherlands (2011,hour) OECD Average: 38.5 Source: OECD
  • 70. Reducing Energy Import Bill 70
  • 71. Source: TURKSTAT, Bloomberg Energy Import Bill (Brent,$pbl) EnergyImports(BillionDollars) 71
  • 72. High Dependence on Energy Imports 72% Total Energy 92% Oil 98% Natural-Gas 72
  • 73. Developing Local & Renewable Resources Source: Ministry of Energy and Natural Resources Electricity Generation Installed Capacity MW % of Total Current Installed Capacity (2013) 64,044 - Renewable Energy 25,596 40.0 Power Plants Under Construction 14,338 - Renewable Energy 10,804 75.4 In 5-to-7 years 78,382 - Renewable Energy 36,401 46.4 73
  • 74. JVs in Renewable Energy 74 Overthenext decadeinTurkey, • 20,000 MW, wind power generation • 3,000 MW, solar power plants • 600 MW, geothermal power plants • An energy stock market will be established
  • 75. Building Nuclear Capacity Akkuyu: JW with Russia Sinop JW with a Japanese-French consortium Working on a 3rd plant 75
  • 76. Improving Energy Efficiency Industry 20% Transportation 15% Construction 30% 76
  • 77. Reducing Regional Development Gaps 77
  • 78. Southeast Anatolian Project ₺36.1 bn invested in Southeast Anatolian Project during 2003-13 22 dams, almost completed 416 thousand, new jobs since 2009 $6.6bn contribution to the economy 78
  • 79. East Anatolian Project (DAP) Source: Ministry of Development Division of GAP Administration Create 1.2 mn jobs Contribute $1.4bn to the economy 79
  • 80. Konya Plain Project (KOP) 80 14 irrigation 3 drinking water 1 energy 18 GREAT PROJECTS
  • 81. Strong Long-Term Prospects 81
  • 82. ‹#›
  • 83. Real Convergence with AMs 22.7 35.5 37.0 58.6 20 25 30 35 40 45 50 55 60 65 2002 2013 Turkey / USA Turkey /European Union Source: IMF,OECD, Turkstat 83
  • 84. Determinants of Long-Term Growth Quality of Institutions Demographics Productivity 84
  • 85. Improving Quality of Institutions Corruption Perception: 2013: 53rd in 177 2002: 65th in 102 Ease of Doing Business: 2013-14: 69th in 185 2006: 84th in 175 Global Competitiveness: 2013: 44th in 148 2005: 71st in 117 85Source: WB, WEF, Transparency International
  • 86. Corruption Perceptions Index (2002) (65th among 102 countries) 31 44 45 58 59 65 70 73 74 96 20 30 40 50 60 70 80 90 100 İtalya Yunanistan Brezilya Meksika Çin TÜRKİYE Arjantin Hindistan Russia Indonesia Source: Transparency International 86
  • 87. Corruption Perceptions Index (2013) (53rd among 177 countries) Source: Transparency International 53 69 72 80 80 94 106 106 114 127 40 50 60 70 80 90 100 110 120 130 140 TURKEY Italy Brazil China Greece India Argentina Mexico Indonesia Russia 87
  • 88. Within the period of 2005-2012, Turkey has ranked higher than Russia, Argentina and Greece.(71st among 117 countries) 31 35 36 38 43 45 47 48 53 54 57 59 67 68 69 71 30 35 40 45 50 55 60 65 70 75 Portekiz Hungary SlovakRep. Italy Poland India Greece China Russia Argentina Brazil Mexico Romania Ukraine Indonesia TURKEY Source: World Economic Forum Global Competitiveness Index (2005) 88
  • 89. (44th among 148 countries) Source: World Economic Forum Global Competitiveness Index (2013) 29 38 42 44 49 51 55 56 60 63 64 76 78 84 91 104 25 35 45 55 65 75 85 95 105 China Indonesia Poland TURKEY Italy Portugal Mexico Brazil India Hungary Russia Romania SlovakRep. Ukraine Greece Argentina 89
  • 90. (84th among 175 countries) Source: World Bank Ease of Doing Business (2006) 62 69 70 71 84 93 97 108 111 122 131 132 134 138 60 70 80 90 100 110 120 130 140 Mexico Italy Uruguay Romania TURKEY Argentina Russia China Greece Brazil Indonesia Ukraine Croatia India 90
  • 91. (69th among 189 countries) Source: World Bank Ease of Doing Business (2013) 53 65 69 72 73 88 89 92 96 112 116 120 126 134 20 40 60 80 100 120 140 Mexico Italy TURKEY Greece Romania Uruguay Crotia Russia China Ukraine Brazil Indonesia Argentina India 91
  • 92. Favorable Demographics Source: Eurostat Shareof15-24yearsoldinTotalPop.(%) 92 16.6 7 9 11 13 15 17 19 21 Spain Italy Andorra Slovenia Greece Portugal Bulgaria Germany Czech Republic Serbia Switzerland Ireland Croatia Estonia Latvia France Austria Hungary Luxembourg Finland Netherlands Ukraine Poland Denmark Sweden United Kingdom Slovakia Norway Malta Lithuania Montenegro Iceland Macedonia Georgia Moldova Turkey Azerbaijan
  • 93. 2.0 0.7 0.3 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0 TURKEY OECD EU-27 AnnualAverageGrowthRate(%,2001-11) Working Age Population Growth Source: OECD, Eurostat, Turkstat 93
  • 94. Have Investors Noticed the Transformation? 94
  • 95. International Companies Operating in Turkey (1000s) Source: Ministry of Economy 95
  • 96. Foreign Direct Investment Inflows Source: CBRT (Billiondollar) 96 14.8 136.3 0 25 50 75 100 125 150 1980-2002 2003-2013
  • 97. REER Appreciation Source: CBRT (2003=100) 97
  • 98. Thank You… 98