Turkish Arab Capital Markets Forum

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Turkish Arab Capital Markets Forum

  1. 1. Turkish-Arab Capital Markets ForumNovember 16, 2012Mehmet ŞimşekMinister of Finance1
  2. 2. OutlineGlobal Backdrop• Growing Links• Where Would You Put Your Money?• Why Should You Invest in Turkey?• Outlook for the Turkish EconomyTurkey & MENA2
  3. 3. GLOBAL BACKDROP3
  4. 4. Advanced Market Growth Rates in 2012Source: IMF3,32,2 2,21,3-0,4-101234World Japan USA Advanced Economies Euro AreaGrowth(%)
  5. 5. EM Growth Rates in 20125Growth(%)Source: IMF6,75,35,04,03,22,0012345678Emerging Asia MENA Sub-Saharan Africa CIS Latin America Emerging Europe
  6. 6. GDP (Advanced Markets)Source: Eurostat(2007-Q4=100)91939597991012007-Q42008-Q1Q2Q3Q42009-Q1Q2Q3Q42010-Q1Q2Q3Q42011-Q1Q2Q3Q42012-Q1Q2USA Eurozone Japan6
  7. 7. Industrial Production and World Trade-50-40-30-20-1001020302000-172001-172002-172003-172004-172005-172006-172007-172008-172009-172010-172011-172012-17Advanced Economies Industrial ProductionEmerging Economies Industrial ProductionWorld TradeSource: IMF WEO October 2012(%Change,3-MonthMA)
  8. 8. Unemployment (Advanced Markets)Source: Eurostat, BLS(December2007=100,%,s.a.)8801001201401601802002202007-122008-122009-122010-122011-12USA Euro Area Japan
  9. 9. Debt Matters9Debt is bad for growthTreshold levels• 85% of GDP for government debt• 90% of GDP for corporate debt• 85% of GDP for household debtSource: The real effects of debt, Stephen G Cecchetti, M S Mohanty and Fabrizio Zampolli, September 2011
  10. 10. Source: IMF, OECDDebtStock/GDP(%)Government Debt Stock67,2 66,474,5107,293,6107,6111,794,9109,360708090100110120USA Eurozone OECD2007 2012 201310
  11. 11. Source: ECBDebtStock/GDP(%)Corporate & Household Debt Stock116065707580859095US Euro Zone US Euro ZoneHousehold Debt-to-GDP Corporate Debt-to-GDP
  12. 12. Share of EMs in World GDPSource: IMF, October 2012GDPbasedonPPPshareofworldtotal(%)3035404550556065701992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Advanced economies Emerging market and developing economies
  13. 13. Growth Outlook and the Share in World GDPUnited StatesChinaIndiaJapanGermanyBrazilUnited KingdomFranceMexicoKoreaCanadaIndonesiaTurkeyNigeria1234567890 2 4 6 8 10 12 14 16 18 20Source: IMF, October 2012Share in World GDP by PPP, 2012 (%)Averagegrowthrate(2012-2017,%)
  14. 14. Deterioration in the Eurozone CrisisUSA Debt Ceiling and the Fiscal CliffHard Landing in Emerging MarketsGeopolitical RisksRisks to the Global Outlook14
  15. 15. Turkey & MENA: Growing Links15
  16. 16. MENA: A Sizeable Regional MarketIran$475 bnMorocco$102 bnAlgeria$183 bnUAE$358 bnQatar$173 bnEgypt$232 bnTurkey$772 bnSaudi Arabia$560Libya$36 bnYemen$58Oman$67Syria$183 bnIraq$109 bnMENA: $2,981 bnMENA + Turkey: $3,75316Source: IMF, 2011
  17. 17. MENA: TradeTotal Exports of MENA: $1,388 bnOf which Oil: $897 bnTotal Imports of MENA: $844 bn17Source: WTO, 2011
  18. 18. MENA & Turkey: Regional TradeTurkeyTurkey’s Total Exports to MENA: $32 bn3.8 % of MENA importsRegional Trade: Growing, but should be much larger!18Source: TURKSTAT, 2011Turkey’s Total Imports from MENA: $23 bn1.6 % of MENA exports
  19. 19. MENA: Investments2002-10 MENA FDI Flows:Inflows: $546.1 bnOutflows: $222.1 bn19Source: UNCTAD, 2002-10
  20. 20. MENA & Turkey: Regional InvestmentsInvestments: Growing, but could be much largerTurkey20Source: CBRT, 2002-102002-10 Turkey FDI Flows:Inflows: $14.1 bnOutflows: $3.9 bn
  21. 21. Source: SWF Institute; SWF annual reports; McKinsey Global Institute(2011,$tn)MENA: Sovereign Wealth Fund Assets0,00,10,20,30,40,50,60,70,80,9UAE Saudi Arabia Kuwait Qatar Other21
  22. 22. 1,52,02,53,03,54,02011 2012 2013 2014 2015Low Baseline HighMENA: Sovereign Wealth Fund AssetsSource: SWF Institute; SWF annual reports; McKinsey Global InstituteAverage oil price assumptions (2011-15):• High: $106/barrel• Baseline: $85/barrel• Low: $60/barrel22
  23. 23. Arab SpringShort-Term• Uncertainty• DisruptionLong-Term• Democracy• Prosperity• Stability23
  24. 24. Where would you put your money?24
  25. 25. 1,71,61,30,70,3 0,30,00,1-0,20,00,20,40,60,81,01,21,41,61,82,0UK US Germany Japan10 Yr Bond Yield (%)2 Yr Bond Yield (%)Source: BloombergTo Low Yielding Government Bonds?
  26. 26. Money for Nothing?26
  27. 27. 8001.1001.4001.7002.0002.3002.6002.90026.12.200726.02.200826.04.200826.06.200826.08.200826.10.200826.12.200826.02.200926.04.200926.06.200926.08.200926.10.200926.12.200926.02.201026.04.201026.06.201026.08.201026.10.201026.12.201026.02.201126.04.201126.06.201126.08.201126.10.201126.12.201126.02.201226.04.201226.06.201226.08.201226.10.2012Fed Balance Sheet ($ bn)Source: Bloomberg
  28. 28. 1.2001.5001.8002.1002.4002.7003.00026.12.200726.02.200826.04.200826.06.200826.08.200826.10.200826.12.200826.02.200926.04.200926.06.200926.08.200926.10.200926.12.200926.02.201026.04.201026.06.201026.08.201026.10.201026.12.201026.02.201126.04.201126.06.201126.08.201126.10.201126.12.201126.02.201226.04.201226.06.201226.08.201226.10.2012Source: BloombergECB Balance Sheet (€ bn)
  29. 29. 100110120130140150 31.12.200729.02.200830.04.200830.06.200831.08.200831.10.200831.12.200828.02.200930.04.200930.06.200931.08.200931.10.200931.12.200928.02.201030.04.201030.06.201031.08.201031.10.201031.12.201028.02.201130.04.201130.06.201131.08.201131.10.201131.12.201129.02.201230.04.201230.06.201231.08.201231.10.2012BOJ Balance Sheet (¥ tn)Source: Bloomberg
  30. 30. 80110140170200230260290320350 26.12.200726.02.200826.04.200826.06.200826.08.200826.10.200826.12.200826.02.200926.04.200926.06.200926.08.200926.10.200926.12.200926.02.201026.04.201026.06.201026.08.201026.10.201026.12.201026.02.201126.04.201126.06.201126.08.201126.10.201126.12.201126.02.201226.04.201226.06.201226.08.201226.10.2012BOE Balance Sheet (£ bn)Source: Bloomberg
  31. 31. CBRT is not printing money ( bn)Source: CBRT02468101214161828.12.200728.02.200828.04.200828.06.200828.08.200828.10.200828.12.200828.02.200930.04.200930.06.200931.08.200931.10.200931.12.200928.02.201030.04.201030.06.201031.08.201031.10.201031.12.201028.02.201130.04.201130.06.201131.08.201131.10.201131.12.201129.02.201230.04.201230.06.201231.08.2012
  32. 32. Foreign Participation in ISESource: ISE324352,25766,365,372,467,5 67,366,262,163,33540455055606570752002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Oct 2012(%)
  33. 33. 33Portfolio Investors from Arab Countries*Source: Central Registry Agency0,20,51,32,2 2,27,701234567892007 2008 2009 2010 2011 Oct 2012(binTL)
  34. 34. Market Capitalization in EMs (bn $, 2012)Source: World Federation of Exchanges3430701002003004005006007008009001000
  35. 35. Market Capitalization (% GDP, 2012)Source: World Federation of Exchanges, IMF3533%0%20%40%60%80%100%120%140%160%
  36. 36. Number of listed companies in ISE36288 285297306322327 326 3253503754022602803003203403603804004202002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Sept 2012Source: ISE
  37. 37. Industry Composition of Turkish Stock Market37Source: ISEFinancial institutions;49,7Manufacturing 26.6 Transportation,telecommunication &storage, 11.4Wholesale and retail trade,hotels and restaurants; 5,3Construction and publicworks; 2,8Mining; 1,4Technology; 1,1Electricity, gas & water, 0.8Agriculture, forestry andfishing; 0,0Other; 11,3
  38. 38. Why Should You Invest in Turkey?38
  39. 39. Source: TURKSTAT2002 GDP,$ 230 bn2012 GDP,$ 799 bn39
  40. 40. Source: IMF, TURKSTAT, Ministry of Development0123456Japan EU (27) USA TurkeyA Faster Growing EconomyAverageGrowthRate(2002-11%)40
  41. 41. Turkey$799 BnBulgaria$53 bnGreece$303 BnSyria$64 BnIraq$115 BnIran$482 BnArmenia$10 BnGeorgia$14 BnAlgeria$183 BnLibya$36 BnEgypt$232 BnTunisia$46 Bn41
  42. 42. Putting Our House in OrderCombattingcorruptionCreating a levelplaying fieldImprovinginternationalcompetitiveness42
  43. 43. Corruption Perceptions Index (2002)(65th among 102 countries)3144 4558 59657073 74962030405060708090100 ItalyGreeceBrazilMexicoChinaTURKEYArgentinaIndiaRussiaIndonesiaSource: Transperancy Intenational43
  44. 44. Corruption Perceptions Index (2011)6166 66 697375 758095100 100 100143152406080100120140160TURKEYCrotiaSlovakRepublicItalyBrazilChinaRomaniaGreeceIndiaArgentinaIndonesiaMexicoRussiaUkraine(61st among 183 countries)Source: Transperancy Intenational44
  45. 45. 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)45
  46. 46. 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 country46
  47. 47. 6269 707184939710811112213113860708090100110120130140MexicoItalyUruguayRomaniaTURKEYArgentinaRussiaChinaGreeceBrazilIndonesiaIndia(84th among 175 countries)Source: World BankEase of Doing Business (2006)47
  48. 48. 4871 72737884 8991112124 128 130 13213720406080100120140MexicoTURKEYRomaniaItalyGreeceCrotiaUruguayChinaRussiaArgentinaIndonesiaBrazilIndiaUkraine(71st among 185 countries)Source: World BankEase of Doing Business (2013)48
  49. 49. Intensity of Local Competition• Turkey ranks 16th among 144 countries in terms of theintensity of the local competition.• Turkey has surpassed many developed countries suchas USA, Canada, Switzerland, Spain, France andDenmark.Extent of Market Dominance• Turkey ranks 30th among 144 countries in terms of theextent of market dominance.Effectiveness of Anti-Monopoly Policy• Turkey ranks 31st among 144 countries in terms theeffectiveness of anti-monopoly policy.Investment Environment
  50. 50. International Companies Operating in Turkey(1000s)Source: Ministry of Economy5,66,78,811,715,016,119,222,025,329,630,7051015202530352002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012August50
  51. 51. Foreign Direct Investment InflowsSource: CBRTBilliondollar14.8118.50204060801001201401980-2002 2003-2012 August51
  52. 52. REER AppreciationSource: CBRT(2003=100)55657585951051151251351989-171990-171991-171992-171993-171994-171995-171996-171997-171998-171999-172000-172001-172002-172003-172004-172005-172006-172007-172008-172009-172010-172011-172012-17Linear Trend52
  53. 53. Strong Long-Term Prospects53
  54. 54. 2011Population: 75 mnGDP: $774 bn2050 (projections)Population: 94-97 mnGDP: $3.9 tn-$5.3 tnTowards 2050…Source: Turkstat, HSBC, PricewaterhouseCoopers 54
  55. 55. Ambitious TargetsSource: IMF, PricewaterhouseCoopers1. USA2. China3. India4. Japan5. Germany6. Russia8. UK7. Brazil9. France10. Italy11. Mexico12. South Korea13. Spain14. Canada15. Indonesia16. Turkey17. Iran18. Australia19. Taiwan20. Poland2011 (GDP-PPP) 2050Top 10in the WorldTop 3in Europe6th in Europe16th in the World55
  56. 56. Favorable DemographicsSource: EurostatShareof15-24yearsinTotalPopn(%)5616,879111315171921AndorraItalyGreeceSpainPortugalGermanySloveniaIrelandBulgariaLuxembourgSwitzerlandCroatiaCzechRepublicAustriaLiechtensteinSerbiaFranceHungaryNetherlandsFinlandFranceDenmarkUnitedKingdomNorwaySwedenEstoniaUkraineMaltaPolandLatviaSlovakiaMontenegroLithuaniaIcelandGeorgiaTurkeyMoldovaAzerbaijan
  57. 57. 71,930,383,468,82030405060708090Male FemaleOverall Higher EducationLabor Participation Rate2012July(%)Source: TURKSTATRoom for improvement with further education57
  58. 58. SHORT-TERM OUTLOOK FOR THETURKISH ECONOMY58
  59. 59. Managing a Soft Landing59
  60. 60. Strong Post-Crisis Recovery, butModerating GrowthSource: TURKSTATRealGDP(s.a,2007Q4=100)96,1101,688,2114,1808590951001051101152007-Q1Q2Q3Q42008-Q1Q2Q3Q42009-Q1Q2Q3Q42010-Q1Q2Q3Q42011-Q1Q2Q3Q42012-Q1Q2 60
  61. 61. Rebalancing is well underwayContributiontoGrowth,%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 Export61
  62. 62. Turkey: Growth ProjectionsSource: MTP3,24,05,0 5,03,03,54,04,55,05,52012 2013 2014 2015RealGDPGrowth(%)62
  63. 63. Job Creation hitting Record HighAnnualAverageEmploymentGrowth(%,2007-11)Source: WEO, TURKSTAT3,9-4-3-2-101234IrelandSpainGreeceIcelandDenmarkPortugalEstoniaUSASloveniaJapanItalyFinlandCyprusFranceUnitedKingdomSlovakRepublıcCzechRepublicNetharlandNewZealandHongKongAustriaCanadaGermanyKoreaBelgiumTaiwanNorwaySwitzerlandAustraliaLuxembourgMaltaIsraelSingaporeTurkey63
  64. 64. Unemployment at Decade Low,64801001201401601802002202008-12009-12010-12011-12012-1USAEU-27TurkeyUnemploymentRate,s.a.(December2007=100)
  65. 65. Budget Deficit & Public Debt74.036.531.010.81.60.9-2024681012303540455055606570752002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Debt/GDP (%) (Left Axis) Budget Deficit/GDP (%) (Right Axis)MTP (2013-15)Gen.Gov.BudgetDeficit/GDP(%)Source: Ministry of Development, TreasuryDebt/GDP(%)
  66. 66. Inflation RatesSource: TURKSTAT(%)667,8371115192327312003-1592004-1592005-1592006-1592007-1592008-1592009-1592010-1592011-1592012-159
  67. 67. Turkey: Healthy Banks5101520252006-12007-12008-12009-12010-12011-12012-1Target Rate 12%CapitalAdequacyRatio,%Legal Rate 8%Source: BRSA67
  68. 68. Solid Asset Quality68NonperformingLoanstoTotalLoans*,%* Latest dataSource: BRSA, IMF2,9048121620GreeceRomaniaItalyPortugalRussiaSpainCzechRepublicFranceDenmarkUnitedKingdomUnitedStatesBrazilNetherlandsGermanyTurkeyBelgiumAustriaJapanAustraliaCanadaFinland
  69. 69. Turkey: Strong HouseholdsHouseholdLiabilities,%ofGDP201169Source: CBRT, ECB, Bloomberg88,066,019,50102030405060708090US Euro Area Turkey
  70. 70. A Rough Spot: Current Account Deficit70
  71. 71. Current Account Deficit is Large, but(12MonthRolling,USDbn)Source: Central Bank of TurkeyNarrowing71-80-60-40-20020402002-147102003-147102004-147102005-147102006-147102007-147102008-147102009-147102010-147102011-147102012-147Current AccountCurrent Account without Energy ImportCurrent Account + Net FDI + Net Errors and Omissions
  72. 72. RebalancingSource: TURKSTAT72(12MonthRolling,USDbn)0501001502002502002-172003-172004-172005-172006-172007-172008-172009-172010-172011-172012-17Export İmport0501001502002502002-172003-172004-172005-172006-172007-172008-172009-172010-172011-172012-17Export (exc. energy and gold) Import (exc. energy and gold)
  73. 73. Current Account Deficit: Next Three YearsSource: MTP7.37.16.96.56,46,66,877,27,42012 2013 2014 2015(%,GDP)73
  74. 74. Financing Quality is ImprovingSource: CBRT(12MonthRolling,USDbn)-100102030405060708090 2007-13579112008-13579112009-13579112010-13579112011-13579112012-1357FDI Inflows and Long-Term Portfolio and Short-Term Current Account Deficit74
  75. 75. REER is still Supportive of AdjustmentSource: Central Bank of TurkeyCPI-DevelopingCountries-BasedREER(2003=100)8590951001051101151201252003-147102004-147102005-147102006-147102007-147102008-147102009-147102010-147102011-147102012-14775
  76. 76. Europe56.6%Other43.4%Exports 2002Diversifying away from Europe?Europe38.3%Other61.7%Exports Jan-Sep 2012Source: TURKSTAT76
  77. 77. Source: TURKSTATExports to Asia (% Total Exports)14,535,912182430362002 2012Jan-Sep77
  78. 78. Source: TURKSTATMENA: a life saverExportstoMENA(%ofTotal)12,132,81015202530352002 2012Jan-Sep78
  79. 79. Exports by Destination(12MonthRolling,%ofTotalExport)Source: TURKSTAT79601201802403003602007-13579112008-13579112009-13579112010-13579112011-13579112012-1357AB-27 MENAEU 27
  80. 80. 832051015202530352000 2011Source: TURKSTATExport Diversification - INumber of Products over $1 billion80
  81. 81. 530051015202530352000 2011Source: TURKSTATNumber of Export Markets over $1 billionExport Diversification -II81
  82. 82. 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 33.482
  83. 83. THANK YOU…83

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