Turkish-Arab Economic ForumApril 4, 2013Mehmet ŞimşekMinister of Finance1
Main MessagesGrowing regional trade linksPressing need for diversificationInvest in the regionInvest in Turkey2
Intra-Regional Trade is Important3
Share of intra-regional trade(1990-2009, %, Total Exports)• Europe, stable around 73%• Asia, increased to 52% from 42%• No...
What about intra-regional trade in MENA?5
Trade Volume (%, GDP)Total Trade Excluding Oil Excluding NaturalResourcesMENA 47% 12% 8%WORLD 22% 19% 18%6Source: Behar, A...
Intra-MENA Exports (%)Total Excluding Oil Excluding NaturalResources1994-97 10% 26% 31%1998-2001 9% 23% 30%2002-05 11% 24%...
An Overview of MENA TradeTotal Exports of MENA: $1,388 bnOf which Oil: $897 bnTotal Imports of MENA: $844 bn8Source: WTO, ...
Growing Trade Links betweenTurkey & MENATurkeyTurkey’s Total Exports to MENA: $48.2 bn• 5.7% of MENA ImportsRegional Trade...
Source: TURKSTATShare of MENA in Turkish Exports (%)12.131.61015202530352002 201210
Source: Turkish Contractors’ AssociationShare of MENA in Int’l Construction Contracts (%)11Iraq17%S. Arabia9%Iran7%Ethiopi...
MENA: Investments2002-11 MENA FDI Flows:Inflows: $610.7 bnOutflows: $256.6 bn12Source: UNCTAD, 2002-11
MENA & Turkey: Rising RegionalInvestmentsInvestments: Growing, but could be much largerTurkey13Source: CBRT2002-12 Turkey ...
Intra-Regional Trade is Limited Becausethe Region is not well-DiversifiedOilExportersOilImporters14
Oil Importers15TwinDeficitsFiscalBalanceExternalBalance
Twin Deficits16-9-8-7-6-5-4-3-2-102007 2008 2009 2010 2011 2012 2013Current Account BalanceFiscal Balance%,GDPSource: IMF,...
Oil Exporters17Large TwinSurplusesFiscalBalanceExternalBalance
Large Fiscal Surpluses18Source: IMF, Regional Economic Outlook, Nov 2012(%,GDP)-50510152025302007 2008 2009 2010 2011 2012...
But Fiscal Vulnerability is Rising19Fiscalbreakevenprice*,2012Change in fiscal breakeven price, 2008–12Source: IMF, Region...
Probability that Oil Price Falls Below FiscalBreakeven Price20(2017projection,%)Source: Caceres and Medina (2012)
Fiscal Balances, Highly Sensitive to Oil PricesFor non-GCC oil exporters,a $10 per barrel drop in average 2012 oil pricewo...
Large Current Account SurplusesGCC current account surplus(2012): $400 billion22China + Germany current account surplus:(2...
Also Highly Sensitive to Oil Price Volatility10 % drop in oil prices would reduce GCCC/A surplus down by about $150 billio...
Who manages C/A Surpluses?US$400 billion surplus24US$210 billionCentral Bank(Gross Reserves)US$160 billionSovereign wealth...
Source: SWF Institute; SWF annual reports; McKinsey Global Institute(2012,$tn)MENA: Sovereign Wealth Fund Assets250,00,10,...
2,02,12,32,52,60,00,10,30,40,60,00,10,20,20,31,52,02,53,03,54,02011 2012 2013 2014 2015Low Baseline HighMENA: Sovereign We...
Time for DiversificationRegional Energy Consumptionis RisingShale gas revolution mightdepress oil prices27
28Source: International Energy Agency, 2012(Billionsofcubicmeters)Natural Gas Consumption in MENAIncrease in regional gas ...
29Source: U.S. Energy Information Administration, 2012(Trillionsofcubicfeet)Share of gas in the global energy mix could re...
Invest in the Region30
MENA: A Sizeable Regional MarketYemen$58MENA: $2,954 bnMENA + Turkey: $3,740 bn31Source: IMF, 2012
MENA: A Sizeable Regional Market-IIIran$475 bnYemen$58MENA: 389.3 million peopleMENA + Turkey: 464.9 million people32Sourc...
Extremely favorable demographicsTurkey: 50%
Huge Investment Needs$4.3 trillionconstruction projectsby 2020.$250bnpower sectorin the next 534Source: 11th Power-Gen Mid...
Strong Growth Prospects35MENAGDP(CurrentPrices,$Tn)0,83,03,13,23,43,63,80,00,51,01,52,02,53,03,54,02002 2012 2013 2014 201...
Invest in TurkeyStrongFundamentalsTurkey’sLong-TermProspects36
Strong Fundamentals37
Political Stability38
39Rapidly Growing Economy35.12,533,544,555,51993-2002 2003-12Growth, %Kaynak: TURKSTAT
Real Convergence with the EUIncomePerCapita(PPP,%)Kaynak: IMF, OECD, TURKSTAT23,535,033,251,220253035404550552002 2012Turk...
Low Deficit10,87,94,10,1-1,30,21,65,53,00,41,3 1,5 1,2 0,9-2,00,02,04,06,08,010,012,02002 2003 2004 2005 2006 2007 2008 20...
74,067,759,652,746,539,9 40,046,142,439,236,035,033,031,030,035,040,045,050,055,060,065,070,075,02002 2003 2004 2005 2006 ...
107,2125,599,16,2020406080100120140198019811982198319841985198619871988198919901991199219931994199519961997199819992000200...
Well-Capitalized Banking SectorCapitalAdequacyRatio,%Target Rate 12%Legal Rate 8%Source: BRSA44051015202530352003-14710200...
Household Leverage is LowSource: CBRT, ECB(HouseholdLiabilities,%ofGDP,2012Q3)4565,720,30 20 40 60 80 100 120 140 160Denma...
46Source: CBRT, Cetinkaya, March 2013, BRSA(Corporateliabilities,%,GDP)36,80 20 40 60 80 100 120LuxembourgSpainPortugalNet...
Current Account Deficit High but(12MonthRolling,USDbn)Source: CBRT47-80-60-40-2002040 2002-147102003-147102004-147102005-1...
Strong Long-Term Prospects48
GDPSource: TURKSTAT, Medium-Term Program,PwC200220502002$ 230billion2050$ 5 trillion2012$ 786 billion2023$ 2 trillion49
GDP per CapitaSource: TURKSTAT, Medium-Term Program,PwC200220502002$ 3,4922012$10,5042023$ 25,0002050$ 50,00050
Ambitious TargetsSource: IMF, PricewaterhouseCoopers1. USA2. China3. India4. Japan5. Germany6. Russia8. UK7. Brazil9. Fran...
Determinants of Long-Term GrowthQuality of InstitutionsDemographicsProductivity52
A Strong Priority & Reform Agenda53EnhancingCompetitionDeepeningCapitalMarketsEducationImprovingLabor MarketFlexibilityLoc...
Quality of InstitutionsCombattingcorruptionCreating a levelplaying fieldImprovinginternationalcompetitiveness54
Corruption Perceptions Index (2002)(65th among 102 countries)Source: Transparency International 55183640526265951020304050...
Corruption Perceptions Index (2012)(54th among 174 countries)Source: Transparency International5627 273953 54 58 6166 6675...
Within the period of 2005-2012, Turkey has ranked higher than Russia, Argentina and Greece.(71st among 125 countries)Sourc...
(43rd among 144 countries)Source: World Economic ForumGlobal Competitiveness Index (2012)Moved up 16 places in a year2nd f...
(84th among 175 countries)Source: World BankEase of Doing Business (2006)592635405268737784 871011131171231351401652050801...
(71st among 185 countries)Source: World BankEase of Doing Business (2012)60222638 40 4247 50718297106 109115 118144 145152...
Intensity of Local Competition• Turkey ranks 16th among 144 countries in terms of theintensity of the local competition.• ...
Favorable DemographicsSource: EurostatShareof15-24yearsoldinTotalPop.(%)16.879111315171921AndorraItalyGreeceSpainPortugalG...
2,01,00,30,70,20,40,60,81,01,21,41,61,82,0Turkey USA EU-27 OECDAnnualAveragePopulationGrowthRate(%,2001-11)Growth Rate of ...
Have Investors noticed theTransformation?64
International Companies Operating in Turkey(1000s)Source: Ministry of Economy655,66,78,811,715,016,119,221,925,229,633,1 3...
Foreign Direct Investment InflowsSource: CBRT(Billiondollar)14.8122.70204060801001201401980-2002 2003-201266
REER AppreciationSource: CBRT(2003=100)675565758595105115125135 1989-171990-171991-171992-171993-171994-171995-171996-1719...
Invest in TurkeyInvest in Future, Invest in Turkey68
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Turkish Arab Economic Forum opening remarks

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Turkish Arab Economic Forum opening remarks

  1. 1. Turkish-Arab Economic ForumApril 4, 2013Mehmet ŞimşekMinister of Finance1
  2. 2. Main MessagesGrowing regional trade linksPressing need for diversificationInvest in the regionInvest in Turkey2
  3. 3. Intra-Regional Trade is Important3
  4. 4. Share of intra-regional trade(1990-2009, %, Total Exports)• Europe, stable around 73%• Asia, increased to 52% from 42%• North America, rose to 48% from 41%4Source: WTO, World Trade Report 2011
  5. 5. What about intra-regional trade in MENA?5
  6. 6. Trade Volume (%, GDP)Total Trade Excluding Oil Excluding NaturalResourcesMENA 47% 12% 8%WORLD 22% 19% 18%6Source: Behar, A. and C. Freund, 2011, The Trade Performance of the Middle East and North Africa
  7. 7. Intra-MENA Exports (%)Total Excluding Oil Excluding NaturalResources1994-97 10% 26% 31%1998-2001 9% 23% 30%2002-05 11% 24% 35%2006-09 11% 25% 38%7Source: Behar, A. and C. Freund, 2011, The Trade Performance of the Middle East and North AfricaRegional integration likely to increase further
  8. 8. An Overview of MENA TradeTotal Exports of MENA: $1,388 bnOf which Oil: $897 bnTotal Imports of MENA: $844 bn8Source: WTO, 2011
  9. 9. Growing Trade Links betweenTurkey & MENATurkeyTurkey’s Total Exports to MENA: $48.2 bn• 5.7% of MENA ImportsRegional Trade: Growing, but should be much larger!9Source: TURKSTAT, 2012Turkey’s Total Imports from MENA: $24.2 bn• 1.7% of MENA Exports
  10. 10. Source: TURKSTATShare of MENA in Turkish Exports (%)12.131.61015202530352002 201210
  11. 11. Source: Turkish Contractors’ AssociationShare of MENA in Int’l Construction Contracts (%)11Iraq17%S. Arabia9%Iran7%Ethiopia6%UAE5%Qatar3%Morocco3%Non-MENA50%$26.1 bnTotal value of internationalprojects (2012)
  12. 12. MENA: Investments2002-11 MENA FDI Flows:Inflows: $610.7 bnOutflows: $256.6 bn12Source: UNCTAD, 2002-11
  13. 13. MENA & Turkey: Rising RegionalInvestmentsInvestments: Growing, but could be much largerTurkey13Source: CBRT2002-12 Turkey FDI Flows:Inflows: $8.3bn3.2% of MENA OutflowsOutflows: $1.1 bn0.2% of MENA Inflows
  14. 14. Intra-Regional Trade is Limited Becausethe Region is not well-DiversifiedOilExportersOilImporters14
  15. 15. Oil Importers15TwinDeficitsFiscalBalanceExternalBalance
  16. 16. Twin Deficits16-9-8-7-6-5-4-3-2-102007 2008 2009 2010 2011 2012 2013Current Account BalanceFiscal Balance%,GDPSource: IMF, Regional Economic Outlook, Nov 2012
  17. 17. Oil Exporters17Large TwinSurplusesFiscalBalanceExternalBalance
  18. 18. Large Fiscal Surpluses18Source: IMF, Regional Economic Outlook, Nov 2012(%,GDP)-50510152025302007 2008 2009 2010 2011 2012 2013MENAGCC
  19. 19. But Fiscal Vulnerability is Rising19Fiscalbreakevenprice*,2012Change in fiscal breakeven price, 2008–12Source: IMF, Regional Economic Outlook, Nov 2012*Fiscal breakeven price: Oil price at which the fiscal balance is zero
  20. 20. Probability that Oil Price Falls Below FiscalBreakeven Price20(2017projection,%)Source: Caceres and Medina (2012)
  21. 21. Fiscal Balances, Highly Sensitive to Oil PricesFor non-GCC oil exporters,a $10 per barrel drop in average 2012 oil pricewould reduce the fiscal surplusby almost 6 ppts of GDP21Source: IMF, Regional Economic Outlook, Nov 2012GCC Oil ExportersNon-GCC Oil ExportersAlgeria Libya
  22. 22. Large Current Account SurplusesGCC current account surplus(2012): $400 billion22China + Germany current account surplus:(2012) $374billionSource: IMF, Regional Economic Outlook, Nov 2012
  23. 23. Also Highly Sensitive to Oil Price Volatility10 % drop in oil prices would reduce GCCC/A surplus down by about $150 billion23Source: IMF, Regional Economic Outlook, Nov 2012
  24. 24. Who manages C/A Surpluses?US$400 billion surplus24US$210 billionCentral Bank(Gross Reserves)US$160 billionSovereign wealth fundsSource: IMF, Regional Economic Outlook, Nov 2012
  25. 25. Source: SWF Institute; SWF annual reports; McKinsey Global Institute(2012,$tn)MENA: Sovereign Wealth Fund Assets250,00,10,20,30,40,50,60,70,80,9UAE Saudi Arabia Kuwait Qatar Other
  26. 26. 2,02,12,32,52,60,00,10,30,40,60,00,10,20,20,31,52,02,53,03,54,02011 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/barrel26
  27. 27. Time for DiversificationRegional Energy Consumptionis RisingShale gas revolution mightdepress oil prices27
  28. 28. 28Source: International Energy Agency, 2012(Billionsofcubicmeters)Natural Gas Consumption in MENAIncrease in regional gas production would go toward meeting incrementaldomestic demand;Not toward generating additional export earnings.
  29. 29. 29Source: U.S. Energy Information Administration, 2012(Trillionsofcubicfeet)Share of gas in the global energy mix could reach 25% in 2035,overtaking coal to become the 2nd largest primary energy source after oil.US Natural Gas ProductionUS will become a net exporter of natural gas by about 2022
  30. 30. Invest in the Region30
  31. 31. MENA: A Sizeable Regional MarketYemen$58MENA: $2,954 bnMENA + Turkey: $3,740 bn31Source: IMF, 2012
  32. 32. MENA: A Sizeable Regional Market-IIIran$475 bnYemen$58MENA: 389.3 million peopleMENA + Turkey: 464.9 million people32Source: IMF, 20123.5 mn32.2 mn35.9 mn10.7 mn6.5 mn80.4 mn32.7 mn0.9 mn25.1 mn5.4 mn28.2 mn1.1 mn1.8 mn3.7 mn32.9 mn3.9 mn6.3 mn3.0 mn
  33. 33. Extremely favorable demographicsTurkey: 50%
  34. 34. Huge Investment Needs$4.3 trillionconstruction projectsby 2020.$250bnpower sectorin the next 534Source: 11th Power-Gen Middle East Conference, Mena Economic Forum Feb 2013
  35. 35. Strong Growth Prospects35MENAGDP(CurrentPrices,$Tn)0,83,03,13,23,43,63,80,00,51,01,52,02,53,03,54,02002 2012 2013 2014 2015 2016 2017ProjectionsSource: IMF, 2012
  36. 36. Invest in TurkeyStrongFundamentalsTurkey’sLong-TermProspects36
  37. 37. Strong Fundamentals37
  38. 38. Political Stability38
  39. 39. 39Rapidly Growing Economy35.12,533,544,555,51993-2002 2003-12Growth, %Kaynak: TURKSTAT
  40. 40. Real Convergence with the EUIncomePerCapita(PPP,%)Kaynak: IMF, OECD, TURKSTAT23,535,033,251,220253035404550552002 2012Turkey /USA Turkey /Euro Zone
  41. 41. Low Deficit10,87,94,10,1-1,30,21,65,53,00,41,3 1,5 1,2 0,9-2,00,02,04,06,08,010,012,02002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Maastricht Criteria: 3%Medium-Term Program(2013-15)Achieved Maastricht Criteria except 2009Source: Ministry of DevelopmentBudgetDeficit-to-GDP,%41
  42. 42. 74,067,759,652,746,539,9 40,046,142,439,236,035,033,031,030,035,040,045,050,055,060,065,070,075,02002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Medium-Term Program(2013-15)Low DebtDebt-to-GDP,%Satisfying Maastricht Criteria since 2004Maastricht Criteria: 60%Source: Treasury42
  43. 43. 107,2125,599,16,202040608010012014019801981198219831984198519861987198819891990199119921993199419951996199719981999200020012002200320042005200620072008200920102011201243Declining Inflation Rate (y/y, %)Source: TURKSTATLowest rate for the past 44 years2023 target low single-digits
  44. 44. Well-Capitalized Banking SectorCapitalAdequacyRatio,%Target Rate 12%Legal Rate 8%Source: BRSA44051015202530352003-147102004-147102005-147102006-147102007-147102008-147102009-147102010-147102011-147102012-147102013-1Capital adequacy ratio twice theminimum legal limit of 8%.
  45. 45. Household Leverage is LowSource: CBRT, ECB(HouseholdLiabilities,%ofGDP,2012Q3)4565,720,30 20 40 60 80 100 120 140 160DenmarkNetherlandsIrelandUnited KingdomPortugalSwedenSpainEuro areaFinlandGreeceMaltaGermanyFranceBelgiumLuxembourgAustriaItalyEstoniaPolandLatviaHungaryCzech RepublicSloveniaSlovakiaLithuaniaTurkey
  46. 46. 46Source: CBRT, Cetinkaya, March 2013, BRSA(Corporateliabilities,%,GDP)36,80 20 40 60 80 100 120LuxembourgSpainPortugalNetherlandsIrelandDenmarkItalySloveniaAustriaSwedenGreeceFranceLatviaEstoniaTurkeyGermanyFinlandBelgiumUnited KingdomHungaryLithuaniaSlovakiaCzech RepublicPolandModerate Level of Corporate Liabilities
  47. 47. Current Account Deficit High but(12MonthRolling,USDbn)Source: CBRT47-80-60-40-2002040 2002-147102003-147102004-147102005-147102006-147102007-147102008-147102009-147102010-147102011-147102012-147102013-1Current AccountCurrent Account without Energy ImportCurrent Account + Net FDI + Net Errors and OmissionsWe are managing it well
  48. 48. Strong Long-Term Prospects48
  49. 49. GDPSource: TURKSTAT, Medium-Term Program,PwC200220502002$ 230billion2050$ 5 trillion2012$ 786 billion2023$ 2 trillion49
  50. 50. GDP per CapitaSource: TURKSTAT, Medium-Term Program,PwC200220502002$ 3,4922012$10,5042023$ 25,0002050$ 50,00050
  51. 51. 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 World51
  52. 52. Determinants of Long-Term GrowthQuality of InstitutionsDemographicsProductivity52
  53. 53. A Strong Priority & Reform Agenda53EnhancingCompetitionDeepeningCapitalMarketsEducationImprovingLabor MarketFlexibilityLocal &RenewableEnergyInfrastructureCombattingShadowEconomyMoving up theValue-ChainNarrowingRegionalDevelopmentGaps
  54. 54. Quality of InstitutionsCombattingcorruptionCreating a levelplaying fieldImprovinginternationalcompetitiveness54
  55. 55. Corruption Perceptions Index (2002)(65th among 102 countries)Source: Transparency International 5518364052626595102030405060708090100IsraelTunisiaJordanMoroccoEgyptTURKEYAzerbaijan
  56. 56. Corruption Perceptions Index (2012)(54th among 174 countries)Source: Transparency International5627 273953 54 58 6166 667588105118128133144156 16016920406080100120140160180QatarUAEIsraelBahrainTURKEYJordanOmanKuwaitSaudiArabiaTunisiaMoroccoAlgeriaEgyptLebonanIranSyriaYemenLibyaIraq
  57. 57. Within the period of 2005-2012, Turkey has ranked higher than Russia, Argentina and Greece.(71st among 125 countries)Source: World Economic ForumGlobal Competitiveness Index (2005)57233237424649 50527176821030507090 IsraelUAETunisiaJordanQatarKuwaitBahrainEgyptTURKEYMoroccoAlgeria
  58. 58. (43rd among 144 countries)Source: World Economic ForumGlobal Competitiveness Index (2012)Moved up 16 places in a year2nd fastest rising country58111824 2632 35 374364 667091107 110 1131401030507090110130150QatarSaudiArabiaUAEIsraelOmanBahrainKuwaitTURKEYJordanIranMoroccoLebonanEgyptAlgeriaLibyaYemen
  59. 59. (84th among 175 countries)Source: World BankEase of Doing Business (2006)592635405268737784 87101113117123135140165205080110140170 IsraelSaudiArabiaKuwaitOmanUAEJordanTunisiaTURKEYLebonanYemenIranMoroccoAlgeriaSyriaIraqEgypt
  60. 60. (71st among 185 countries)Source: World BankEase of Doing Business (2012)60222638 40 4247 50718297106 109115 118144 145152165205080110140170SaudiArabiaUAEIsraelQatarBahrainOmanTunisiaTURKEYKuwaitMoroccoJordanEgyptLebonanYemenSyriaIranAlgeriaIraq
  61. 61. 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
  62. 62. Favorable DemographicsSource: EurostatShareof15-24yearsoldinTotalPop.(%)16.879111315171921AndorraItalyGreeceSpainPortugalGermanySloveniaIrelandBulgariaLuxembourgSwitzerlandCroatiaCzechRepublicAustriaLiechtensteinSerbiaHungaryNetherlandsFinlandFranceDenmarkUnitedKingdomNorwaySwedenEstoniaUkraineMaltaPolandLatviaSlovakiaMontenegroLithuaniaIcelandFormerYugoslav…GeorgiaTurkeyMoldovaAzerbaijan62
  63. 63. 2,01,00,30,70,20,40,60,81,01,21,41,61,82,0Turkey USA EU-27 OECDAnnualAveragePopulationGrowthRate(%,2001-11)Growth Rate of Working-Age PopulationSource: OECD, Eurostat, TURKSTAT 63
  64. 64. Have Investors noticed theTransformation?64
  65. 65. International Companies Operating in Turkey(1000s)Source: Ministry of Economy655,66,78,811,715,016,119,221,925,229,633,1 33,305101520253035200220032004200520062007200820092010201120122013January
  66. 66. Foreign Direct Investment InflowsSource: CBRT(Billiondollar)14.8122.70204060801001201401980-2002 2003-201266
  67. 67. REER AppreciationSource: CBRT(2003=100)675565758595105115125135 1989-171990-171991-171992-171993-171994-171995-171996-171997-171998-171999-172000-172001-172002-172003-172004-172005-172006-172007-172008-172009-172010-172011-172012-172013-1Linear Trend
  68. 68. Invest in TurkeyInvest in Future, Invest in Turkey68

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