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Turkey’s Transformation Over the Last Decade

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  • Wehavecarriedoutbankingsectorstresstests since 2004.In2006, weinitiatedthe12% objectivecapitaladequacyratioapplication (Basel iI, 8%).In 2009, with the amendment made to Decision No. 32, we prevented the household to take currency risk by prohibiting foreign currency loans. We reduced the interest risk of the household.18 Haziran 2011(Resmi Gazete): Finansmanşirketleri Mart, Haziran, Eylül ve Aralikdönemleriitibariylakonut ve taşitkredisidişindakitüketicikredileriiçinkreditutarininyüzde 4’ü oraninda, anapara, faizveya her ikisinintahsilinde 30 gündenfazlaancak 90 gündenazgecikmeolanbuniteliktekikredileriçinkreditutarininyüzde 8’i oranindagenelkarşilikayirirlar.”
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    • 1. Turkey’s Transformation Over the Last Decade December 6, 2013 Mehmet Şimşek Minister of Finance 1
    • 2. Outline Transformation & Convergence Story Priorities & Structural Reforms Long-Term Prospects 2
    • 3. A Convergence Story 3
    • 4. Average Real GDP Growth Rates 6 5.5 5.1 5 % 4.5 4 3.1 3 2 1924-2002 1993-2002 2003-2012 2014-2018 Source: Turkstat, Ministry of Development 4
    • 5. Real Convergence with AMs 65 60 Turkey / USA 55 Turkey /European Union 58.6 50 45 40 37.0 35.5 35 30 25 22.7 20 2002 Source: IMF,OECD, Turkstat 2013 5
    • 6. ‹#›
    • 7. GDP Per Capita GDP Per Capita ($) 11 000 GDP Per Capita (PPP) 19 000 10 497 9 000 18 125 7 000 17 000 5 000 15 000 GDP Per Capita (TL, Real) 1 572 1 600 3 492 13 000 3 000 11 000 1 400 9 000 1 200 1 000 8 667 2002 2012 7 000 1 099 5 000 1 000 2002 2012 800 600 2002 Source: Turkstat 2012 7
    • 8. Source:TURKSTAT 2013-1 2012-1 2011-1 2010-1 2009-1 2008-1 Employment since 2007 (mn people s.a.) Employment 26 25.5 25 24 23 22 21 20 8
    • 9. How did we achieve it? Political Stability A MacroPrudential Framework Fiscal Prudence Improving Quality of Institutions Price Stability 9
    • 10. Political Stability •17 months 1923-2002 2002-13 •AK Party 10
    • 11. Improving Quality of Institutions Doing Business OECD-FDI Regulatory Restrictiveness Index Corruption Perception Index 2023 Global Competitiveness Index Human Development Index Past Source: WB, WEF, Transparency International, OECD Present 11
    • 12. 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 2016 6.2 6.8 5.3 5.0 5.0 (CPI, Annual, %) 120 125.5 140 100 99.1 107.2 Price Stability 80 60 40 20 0 Source: TURKSTAT, MTP (2014-16) 12
    • 13. Solid Fiscal Position 12.0 10.8 Budget Deficit-to-GDP, % 10.0 8.0 7.9 5.5 6.0 Medium-Term Program (2014-16) 4.1 4.0 Maastricht Criteria: 3% 3.0 1.6 2.0 0.2 0.1 0.4 1.0 1.0 1.1 0.8 0.5 0.0 -2.0 -1.3 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Achieved Maastricht Criteria except 2009 Source: Ministry of Development 13
    • 14. Lower Public Debt 75 74.0 70 67.7 65 Debt-to-GDP, % 60 Maastricht Criteria: 60% 59.6 55 52.7 50 45 40 35 30 46.5 Medium-Term Program (2014-16) 46.1 42.3 39.9 40.0 39.1 36.2 35.0 33.0 31.0 30.0 25 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Satisfying Maastricht Criteria since 2004 Source: Treasury 14
    • 15. Public Sector Net Debt 70 Public Sector Net Debt (%, GDP) 60 61.5 50 35.4 40 30 20 14.7 26.2 10 18.9 0 -4.2 -10 2002 2003 2004 2005 2006 2007 Net TL Source: Treasury 2008 Net FX 2009 2010 2011 2012 2013 Q1 2013 Q2 Total Net 15
    • 16. Net Creditor in International Markets 100 25.2 30 80 25 60 20 88.4 15 20 10 0 (%) (Billion TL) 40 5 -20 -58.1 -40 -3.9 -5 Public Net External Debt Stock (Left Axis) Source: Treasury 2013 Q2 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 -10 2002 -60 0 Public Net External Debt Stock/GDP (Right Axis) 16
    • 17. Macro-Prudential Framework Started banking sector stress tests in 2004 12% target CAR since 2006 Limits on dividend distribution since 2008 A ban on HH FX borrowing since 2009 LTV ratio of 75% on mortgages since 2011 General provisions increased in consumer loans in 2011 17
    • 18. Priorities & Structural Reforms 18
    • 19. Priorities & Strong Reforms Enhancing Democratic Standards Combatting Shadow Economy Improving Access to & Quality of Education Investing in Local & Renewable Energy Deepening Capital Markets Moving up the Value-Chain Narrowing Regional Development Gaps Improving Infrastructure Increasing Labor Market Flexibility 19
    • 20. Enhancing Democratic Standards Reconciliation Process New Democratization Package A Democratization Package A New Constitution 4th Judicial Reform Package EU Accession Process 20
    • 21. Combatting the Shadow Economy Action Plan for Fighting Informality 2011-13 Strengthening Capacity of Revenue Administration & Tax Audit Board Income Tax Reform and Tax Procedural Law 21
    • 22. Reducing Size of Shadow Economy 34 52 51.7 50 48 32.2 32 (%, GDP ) 44 30 42 40 28 37.5 (%, Total Employment ) 46 38 36 26.5 Shadow Economy (Left Axis) 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 34 2003 26 Informal Employment (Right Axis) Source: Schneider, 2013, TURKSTAT 22
    • 23. Education: Budget 19 18 (Education Budget, % of Total) 17 15 13 11 9.4 9 7 2002 Source: Ministry of Finance 2014 23
    • 24. Education: Schooling Rates 130 107.6 110 96.8 (Gross Rates) 96.5 90 92.1 80.8 70 50 44.0 35.8 30 11.7 10 Preschool (age of 4-5 ) Primary School 2002-03 Source: Ministry of Development Secondary School Higher Education 2012-13 24
    • 25. Enhancing Human Capital Stock: PISA Results, Gap b/w Turkey & OECD 55 51 50 47 46 45 40 38 35 30 science math 2009 2012 Source: OECD 25
    • 26. R&D Spending 2023 •3.00% 2018 •1.8% 2013 • 0.92% 2002 • 0.53% Source: The Scientific and Technological Council of Turkey 26
    • 27. Patent, Industrial Design and Trade Mark Applications Trade Mark applications Industrial design applications 2012: 111,143 2002: 36,429 2012: 41,220 Patent applications 2012: 11,599 2002: 1,874 2002: 20,302 27
    • 28. Deepening Capital Markets A New Capital Markets Law Restructuring Borsa Istanbul Istanbul as a Finance Center Incentives for Global Fund Managers, VC & Biz Angels Increasing Savings: Private Pensions 28
    • 29. Energy Import Bill 120 60 100 60.1 50 56.9 80 40 60 30 40 20 (Brent, $ pbl) Energy Imports (Bn $) 70 20 10 9.2 Energy Import 2013 Sep 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 0 2002 0 Oil Prices Source: TURKSTAT, Bloomberg 29
    • 30. Investing in Local & Renewable Resources Building nuclear capacity Increasing free market components Improving energy efficiency 30
    • 31. Reducing Regional Development Disparities 26 Development Agencies GAP Action Plan • 36.1 billion TL to GAP (2003-13) • Reduction of the unemployment rate to 12.4% in 2012 • Creation of 378 thousand new jobs over the last 5 years The Other Regional Development Projects (DAP, KOP, DOKAP) New Investment Incentives Scheme • Regional Incentives • In the 6th Region additional support for • The employee’s share of insurance premium • Income Tax Stoppage 31
    • 32. Improving Infrastructure High Speed Railway Projects Completed: 888 km Under Construction: 1748 km Planned: 1356 km Airports avaible for civil aviation In 2003: 26 Airports In 2013: 52 Airports 32
    • 33. Dual Carriageway Network (January 1, 2003) 1,714 Km Total of Motorways 4,387 Km Total of State and Provincial Dual Carriageways Total: 6,101 Km Dual Carriageway Network (September 30, 2013) 2,244 Km Total of Motorways 20,350 Km Total of State and Provincial Dual Carriageways Total: 22,594 Km 33
    • 34. Labor Market Improving labor market flexibility Increasing female labor-force participation Improving the relation b/w education & employment Improving the relation b/w employment & social protection 34
    • 35. Strong Long-Term Prospects 35
    • 36. GDP 2050 $ 5 trillion 2002 2023 $ 2 trillion 2002 $ 230 billion 2012 $ 786 billion Source: TURKSTAT, Medium-Term Program,PwC 2050 36
    • 37. GDP per Capita 2002 2050 $ 50,000 2023 $ 25,000 2012 $10,497 2002 $ 3,492 2050 Source: TURKSTAT, Medium-Term Program,PwC 37
    • 38. Unemployment 11 10.3 0.9 pts 10 9.5 9.2 1.2 pts Unemployment Rate (%) 9 8 7.2 7 2.2 pts 6 5.0 5 4 2002 2012 Source: TURKSTAT, MTP, Development Plan 2013 2018 2023 38
    • 39. Exports 600 500 500 (Bn $) 400 277 300 200 152 158 2012 2013 100 36 0 2002 Kaynak: TURKSTAT, MTP, Development Plan 2018 2023 39
    • 40. Fiscal Deficit Gen. Gov’t Budget Deficit-to-GDP, % 12 10.8 10 8 10 ppts 6 4 2 1.0 1.0 2012 2013 0.5 ppt 0.5 0 2002 2018 Source: Ministry of Development, MTP, Development Plan 40
    • 41. Determinants of Long-Term Growth Quality of Institutions Demographics Productivity 41
    • 42. Improving Quality of Institutions Corruption perception: 2013: 53rd in 177 2002: 65th in 102 Global competitiveness: 2013: 44th in 148 2005: 71st in 117 Source: WB, WEF, Transparency International Ease of Doing Business: 2013-14: 69th in 185 2006: 84th in 175 42
    • 43. Share of 15-24 year-olds in Total Pop. (%) Favorable Demographics Azerbaijan Moldova Turkey Georgia Macedonia Iceland Lithuania Montenegro Slovakia Latvia Poland Malta Ukraine Estonia Sweden Norway United Kingdom Denmark France Finland Netherlands Hungary Serbia Liechtenstein Austria Czech Republic Croatia Switzerland Luxembourg Bulgaria Ireland Slovenia Germany Portugal Spain Greece Italy Andorra 16.8 7 Source: Eurostat 9 11 13 15 17 19 21 43
    • 44. Annual Average Population Growth Rate (%, 2001-11) Growth Rate of Working-Age Population Source: OECD, Eurostat, TURKSTAT 44
    • 45. How is Turkey Positioned? 132.0 135 120 (FDI ınflows ,Bn $) 105 90 75 60 45 30 15 14.8 0 1980-2002 2003-2013 September Source: CBRT 45
    • 46. THANK YOU…

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