Your SlideShare is downloading. ×
Turkish Economic & Political Outlook (London & New York)
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×

Saving this for later?

Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime - even offline.

Text the download link to your phone

Standard text messaging rates apply

Turkish Economic & Political Outlook (London & New York)

532
views

Published on

Published in: Economy & Finance, Technology

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
532
On Slideshare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
0
Comments
0
Likes
0
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. Turkish Economic & Political Outlook January 21, 2014 Mehmet Şimşek Minister of Finance
  • 2. Outline Economic & Political Outlook Structural Reforms & Priorities Long-Term Prospects 2
  • 3. Is political stability at stake? 3
  • 4. What is happening? Why? What next? 4
  • 5. 3 Elections Ahead Local Presidential General • March-14 • Jun-14 • Jun-15 5
  • 6. Strong Public Support 50 47.5 45 40 Jan-14 Denge Survey for local elections 35 28.9 (s.a., %) 30 25 20 15 12.7 10 7.1 5 1.7 3 0 AK PARTY Source: DENGE Research Company AK PARTY: Justice and Development Party CHP: Republican People’s Party MHP: Nationalist Movement Party BDP: Peace and Democracy Party SP: Felicity Party CHP MHP BDP SP Others
  • 7. Strong Public Support 50 47 45 Jan-14 ORC Survey for local elections 40 33.6 35 (s.a., %) 30 25 20 15 15 10 4.4 5 0 AK PARTY Source: ORC Research Company AK PARTY: Justice and Development Party CHP: Republican People’s Party MHP: Nationalist Movement Party CHP MHP Others
  • 8. Strong Public Support 45 42.3 40 Jan-14 Sonar Survey for local elections 35 29.8 (s.a., %) 30 25 18.7 20 15 10 5.6 5 2.3 1.3 0 AK PARTY Source: DENGE Research Company AK PARTY: Justice and Development Party CHP: Republican People’s Party MHP: Nationalist Movement Party BDP: Peace and Democracy Party SP: Felicity Party CHP MHP BDP SP Others
  • 9. Fallout from political uncertainty? 9
  • 10. Growth 10
  • 11. Source: Turkstat 120 Q3 Q2 2013-Q1 Q4 Q3 Q2 2012-Q1 Q4 Q3 Q2 2011-Q1 Q4 Q3 Q2 2010-Q1 Q4 Q3 Q2 2009-Q1 Q4 Q3 Q2 2008-Q1 Real GDP (Q1-07 =100, S.A.) Real GDP 119.4 115 110 105 100 95 90 85 11
  • 12. Real GDP Growth 120 Emerging Europe* 115 Real GDP (2007 Q4=100, s.a.) 119.4 Turkey Euro Area USA 110 107.8 105.6 105 100.0 100 97.6 95 90 Source: Turkstat, Eurostat *Poland, Romania, Hungary, Bulgaria, Croatia, Lithuania, Latvia Q3 Q2 2012-Q1 Q4 Q3 Q2 2011-Q1 Q4 Q3 Q2 2010-Q1 Q4 Q3 Q2 2009-Q1 Q4 Q3 Q2 2008-Q1 Q4 Q3 Q2 2007-Q1 85 12
  • 13. Expanding below Trend Growth 11 10.5 2013 10 2003-2012 Average 9 7.7 8 7 5.7 5.1 3.6 7.6 2 3.5 2.6 4.4 3.8 3.7 3.6 2.5 1 1.2 2.0 1.5 1.3 1.2 Source: Ministry of Development, IMF South Africa Brazil TURKEY Colombia India Chile Indonesia China 0 0.2 Hungary 5.3 4.3 Mexico 3 4.7 Poland 5 4 4.7 4.7 Russia 6 13
  • 14. Real GDP Growth 5.0 5.0 4.6 5.0 4.6 4.1 4.0 4.0 3.6 3.2 3.0 2013 2014 Turkey Source: 2014-16 Medium-Term Program, IMF 2015 2016 EM excl China 14
  • 15. Growth Outlook Upside • Pent-up domestic demand • Stronger external demand Downside • Subdued domestic demand due to political uncertainty • Tighter financial conditions 15
  • 16. Source: Central Bank of Turkey, Turkstat * Annual percent change ** Annual difference Nov-13 Sep-13 Jul-13 May-13 Mar-13 Jan-13 Nov-12 Sep-12 Jul-12 May-12 Mar-12 Jan-12 Nov-11 Sep-11 Jul-11 May-11 Mar-11 Jan-11 Nov-10 Sep-10 Jul-10 May-10 Mar-10 Jan-10 Nov-09 Sep-09 Jul-09 May-09 Mar-09 Jan-09 Nov-08 Sep-08 20 Jul-08 May-08 Mar-08 Jan-08 Real Economic Activity Indicators 25 Industrial Production Index*(c.a.) Capacity Utilization** 15 10 5 0 -5 -10 -15 -20 -25 16
  • 17. PMI 60 55 53.5 50.0 50 45 Above 50 last ten months 40 35 30 Source: HSBC 17
  • 18. Confidence Indices 130 85 120 80 110 75 100 90 70 80 65 70 60 60 50 Real Sector Confidence Index (LHS) Source: Central Bank of Turkey, Turkstat Oct-13 Jul-13 Apr-13 Jan-13 Oct-12 Jul-12 Apr-12 Jan-12 Oct-11 Jul-11 Apr-11 Jan-11 Oct-10 Jul-10 Apr-10 Jan-10 Oct-09 Jul-09 Apr-09 Jan-09 Oct-08 Jul-08 Apr-08 Jan-08 55 Capacity utilization (RHS) 18
  • 19. Source:TURKSTAT Jan-13 Jan-12 Jan-11 Jan-10 Jan-09 Jan-08 Employment since 2007 (mn people s.a.) Employment 26 25.5 25 24 23 22 21 20 19
  • 20. Unemployment & Labour Participation Rate 16 52 15 51 14 50 12 48 11 47 10 Unemploymen Rate (Left Axis) Source: Turkstat Labor Force Participation Rate (Right Axis) Oct-13 Jul-13 Apr-13 Jan-13 Oct-12 Jul-12 Apr-12 Jan-12 Oct-11 Jul-11 Apr-11 Jan-11 Oct-10 Jul-10 Apr-10 Jan-10 Oct-09 Jul-09 Apr-09 Jan-09 45 Oct-08 8 Jul-08 46 Apr-08 9 Jan-08 (s.a., %) 49 (s.a., %) 13
  • 21. Growth 21
  • 22. Source: Turkstat, MTP (2014-16) 7.4 5.3 2014 0 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 99.1 100 1997 1996 1995 125.5 140 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983 1982 107.2 120 1981 1980 CPI (Annual, %) Inflation 80 60 40 20 22
  • 23. Inflation 11 Likely to remain high in H1-14 9.5 9.0 9 Downward trend in H2-14 7.4 7 6.2 5.9 5.7 5 3.3 3 3.0 3.0 2.6 1.9 1 Indonesia Source: IMF, Turkstat India TURKEY Russia Brazil South Africa Mexico China Hungary Chile Poland 23
  • 24. Inflation Outlook Upside • Tax Hikes • TL Depreciation Downside • Output Gap • Monetary tightening • Macro prudential measures 24
  • 25. Impact of Recent Tax Hikes on Inflation Alcohol. Bev.: 0.04 ppt Auto: 0.29 ppt Tobacco: 0.18 ppt 0.5 ppt
  • 26. Impact of Currency Depreciation on Inflation 8 7.5 7 6 5.3 5 10% currency depreciation 1.5ppt higher inflation 4 3 Inflation target (MTP) With depreciation effect Source: Kara, Hakan and Öğünç F. (2011). "Effect of Exchange Rate and Import Prices on Inflation", CBRT, Economic Notes, No. 2011/14.
  • 27. Source: CBRT CPI Based REER 87.0 Nov 13 Jun 13 Jan 13 Aug 12 Mar 12 Oct 11 May 11 Dec 10 Jul 10 Feb 10 Sept 09 Apr 09 Nov 08 Jun 08 Jan 08 Aug 07 Mar 07 Oct 06 May 06 Dec 05 Jul 05 Feb 05 Sept 04 Apr 04 Nov 03 90 Jun 03 Jan 03 (2003=100) Currency likely to Correct 140 130 120 110 106.9 100 89.3 80 84.9 CPI (Developing Countries) Based REER 27
  • 28. Source: CBRT, Turkstat Output Gap Inflation Q4-2013 Q3-2013 Q2-2013 Q1-2013 Q4-2012 Q3-2012 Q2-2012 Q1-2012 Q4-2011 Q3-2011 Q2-2011 Q1-2011 Output Gap 12 10 8 6 4 2 0 -2 -4
  • 29. Source: CBRT CBRT Funding Rate O/N Borrowing O/N Lending 5 3 Jan-14 Dec-13 Nov-13 Sep-13 Aug-13 Jul-13 Jun-13 May-13 Apr-13 Mar-13 Jan-13 Dec-12 Nov-12 Oct-12 Sep-12 Aug-12 Jul-12 May-12 Apr-12 Mar-12 Feb-12 Jan-12 Dec-11 Nov-11 Oct-11 ( %) Monetary Policy is Tightening 15 13 11 9 7.75 7 4.5 3.5 1-week Repo Rate 29
  • 30. Source: CBT Personal Vehicle Housing October-13 July-13 April-13 January-13 October-12 July-12 April-12 January-12 October-11 July-11 April-11 January-11 October-10 July-10 April-10 January-10 October-09 July-09 April-09 January-09 October-08 July-08 April-08 January-08 ( %) Interest Rates For Turkish Lira Banks' Loans 29 27 25 23 21 19 17 15 13 11 9 7 Commercial 30
  • 31. Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jul-13 Agu-13 Sep-13 Oct-13 Dec-13 Jan-14 13 week moving avg., y-on-y % Credit Growth is Slowing 45 40 35 30 25 20 15 17.1 10 5 0 * Credit Growth is adjusted for exchange rate movements Source: CBRT 31
  • 32. Financial Conditions in EMs are Tightening Source: Goldman Sachs 32
  • 33. Financial Conditions in Turkey is Tightening Source: CBRT 33
  • 34. Macroprudential Policies Credit cards • Single limit for all credit accounts • Higher minimum payment amount • Limit on payment by installments Consumer loans • Higher reserve ratio for consumer credits excl. mortgages Vehicle and consumer loans • Compulsory advance payment • Term limit for vehicle and consumer loans Others • Incentives for SME and export credit
  • 35. Room to Manoeuvre 35
  • 36. Low Deficit 12.0 10.8 Budget Deficit-to-GDP, % 10.0 8.0 7.9 5.5 6.0 4.1 Maastricht Criteria: 3% 4.0 1.6 2.0 0.1 0.0 -2.0 3.0 0.2 0.4 1.0 1.0 1.1 -1.3 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Achieved Maastricht Criteria except 2009 Source: Ministry of Development 36
  • 37. Budget Deficit (2014) Budget Deficit-to-GDP, % 5 4.7 4.0 4 2.9 3 2 1.1 1 0 USA Source: IMF, OECD, Ministry of Development OECD EU-27 TURKEY 37
  • 38. Fiscal Outlook Upside • Recent tax hikes • Conservative underlying revenue estimations Downside • Subdued domestic demand 38
  • 39. Conservative Underlying Revenue Estimations 2014 NGDP Growth 10.2% 2014 Revenue Growth 3.5% 39
  • 40. Conservative Underlying Revenue Estimations 2013 Privatization Revenue 8.3bn TL 2014 Privatization Revenue forecast 6.9bn TL 40
  • 41. Privatization Agenda (2014) Derince Container Port Kemerkoy & Yenikoy Thermal Power Plants & Port Area of Kemerkoy Çatalağzı Thermal Power Plants 2.8bn $ privatization revenue Yatağan Thermal Power Plants previous years due in 2014 from National Lottery Games Several Real Estates 41
  • 42. Lower Public Debt 75 74.0 70 67.7 65 Debt-to-GDP, % 60 Maastricht Criteria: 60% 59.6 55 52.7 50 46.5 45 40 46.1 39.9 40.0 42.3 39.1 35 36.2 35.0 33.0 30 25 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Satisfying Maastricht Criteria since 2004 Source: Treasury 42
  • 43. Net Creditor in International Markets 100 25.2 30 80 25 60 88.4 15 20 10 0 5 -20 -75.8 -40 -60 -5.0 -80 0 -5 2013 Ç3 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 -10 Public Net External Debt Stock (Left Axis) Source: Treasury (%) (Billion TL) 40 20 Public Net External Debt Stock/GDP (Right Axis) 43
  • 44. Government Debt Securities’ Interest Rates 65 62.7 55 (%) 45 35 25.4 25 15 7.7 5 -5 0.2 2002 2003 2004 2005 2006 Interest Rate Source: Treasury 2007 2008 2009 2010 2011 2012 2013 Real Interest Rate 44
  • 45. Interest Payments 90 85.7 80 70 (%) 60 50 43.2 40 30 20 14.9 11.9 10 0 2002 2003 2004 2005 2006 2007 Interest Payments/Tax Revenues Source: Ministry of Finance 2008 2009 2010 2011 2012 2013 2014 Interest Payments/Budget Expenditures 45
  • 46. GrowTu CAD, Turkey’s Soft Spot 46
  • 47. Current Account Deficit Net Gold Exports -$4.8 billion +$5.7 billion -$10.2 billion (% of GDP) • 2011: • 2012: • 2013 Nov: Source: CBRT 47
  • 48. Factors behind higher CAD Strong domestic demand Euro crisis Energy prices Arab spring 48
  • 49. (12 Month Rolling, USD bn) Financing of Current Account Deficit Source: CBRT 49
  • 50. Outlook for 2014 Significant adjustment is likely, CAD/GDP could fall below 6% • Europe is pulling out of recession • Relatively more stable region • Gold imports could normalize • Tourism revenues will pick up • Cheaper gas from Iraq • Exchange rate weakening • Modest domestic demand 50
  • 51. (3-month-rolling, annual % change) Export to Partners: Europe is pulling out of Recession Source: TURKSTAT 51
  • 52. Export to Partners: Relatively more Stable Region (3-month-rolling, annual % change) 50 45.0 40.3 40 30 20 9.8 10 7.3 0 -10 -8.5 -20 Libya Syria Iraq Tunusia Egypt Source: TURKSTAT 52
  • 53. Current Account is a Weak Spot, but Fundemantals are Strong Diversified Export Markets Flexible Exchange Rate Lower Public Debt Healty Banking System Low Household Leverage
  • 54. Diversified Export Markets 40 34 35 30 25 20 15 10 8 5 0 2002 2012 Number of Export Markets over $1 billion Source: TURKSTAT 54
  • 55. Exports to Europe are on the Fall 2002 Other 43.4% Source: TURKSTAT Europe 56.6% 2012 Other 61% Europe 39% 55
  • 56. But, Exports to MENA are on the Rise 35 31.6 Exports to MENA (% of Total) 30 25 20 15 12.1 10 5 2002 Source: TURKSTAT 2012 56
  • 57. Diversified Product Bundle 35 30 30 25 20 15 9 10 5 0 2002 2012 Number of Products over $1 billion Source: TURKSTAT 57
  • 58. 2002 Source: BRSA November-13 Eylül 13 Mayıs 13 Ocak 13 Eylül 12 Mayıs 12 Ocak 12 Eylül 11 Mayıs 11 Ocak 11 Eylül 10 Mayıs 10 Ocak 10 Eylül 09 Mayıs 09 Ocak 09 Eylül 08 10 Mayıs 08 Capital Adequacy Ratio (%) 2.8 15 Ocak 08 NPL Ratio of Loans (%) Banks are Healhty 17.6 25 20 15.6 Target Rate 12% Legal Rate 8% 5 0 58
  • 59. (Household Liabilities, % of GDP, 2012) Household Leverage is Low Turkey Lithuania Slovakia Hungary Slovenia Latvia Czech Republic Poland Estonia Italy Austria Belgium Luxembourg France Germany Malta Greece Euro Area Finland Spain Sweden Portugal United Kingdom Ireland Netherlands Denmark 65 0 Source: CBRT, ECB No FX exposure 23 20 40 60 80 100 120 140 160 59
  • 60. Turkey’s FX Risk? 60
  • 61. Source: Bloomberg Jan-14 Jul-13 Jan-13 Jul-12 Jan-12 Jul-11 Jan-11 Jul-10 Jan-10 Jul-09 Jan-09 Jul-08 Jan-08 Jul-07 Jan-07 Jul-06 Jan-06 EM Currency Index 115 110 105 100 95 90 85 80 61
  • 62. Exchange Rate Volatility 80 70 Volatility (%) * 60 50 40 Turkey Emerging Economies** 30 20 10 January-06 April-06 July-06 October-06 January-07 April-07 July-07 October-07 January-08 April-08 July-08 October-08 January-09 April-09 July-09 October-09 January-10 April-10 July-10 October-10 January-11 April-11 July-11 October-11 January-12 April-12 July-12 October-12 January-13 April-13 July-13 October-13 January-14 0 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. 62
  • 63. Turkey's FX Position (billion $) Banking Sector* Assets Liabilities Net Position 486.0 484.7 1.4 Real Sector** 93.0 257.4 -164.4 Short Term 81.2 94.9 -13.7 191.0 0.5 190.5 Household*** FX Deposit **** Source: CBRT * Data - Mar. 2013 ** Data - Oct. 2013 *** Data - Mar. 2013 ****Data-10.01.2014 74.2
  • 64. External Debt Projections (2014, USD mn) External Debt Payments are Reasonable Public sector external borrowing requirement: $ 14.8bn Source: CBRT, Treasury 64
  • 65. Source: BRSA Aug-13 Apr-13 Dec-12 Aug-12 Apr-12 Dec-11 Aug-11 Apr-11 Dec-10 Aug-10 Apr-10 Dec-09 Aug-09 Apr-09 Dec-08 Aug-08 Apr-08 Dec-07 Aug-07 Apr-07 Dec-06 Aug-06 Apr-06 Dec-05 Aug-05 Apr-05 Dec-04 Aug-04 Apr-04 Dec-03 Aug-03 60 Apr-03 Dec-02 (Foreign Currency Loans/Total Loans, %) Foreign Currency Loans 65 59 55 50 45 40 35 30 27 25 20
  • 66. Source: BRSA 130 Dec-13 Jun-13 Dec-12 Jun-12 Dec-11 Jun-11 Dec-10 Jun-10 Dec-09 Jun-09 Dec-08 Jun-08 Dec-07 Jun-07 Dec-06 Jun-06 Dec-05 (Billion $) Foreign Currency Deposit of Residents 140 129.6 120 110 100 90 80 70 60 50
  • 67. Firms Unlike 2002, SMEs have limited FX exposure w/ $34.1 billion • 2009 regulation on firms’ FX borrowing • Credit amount no less than $5 million • Maturity of 2-3 years • No FX credit for working capital only for investments FX credit mostly used by large firms Large firms FX borrowing mostly hedged by export earnings
  • 68. Banks Roll-over ratio above 100% FX deposits at CBRT via ROM $35 bn FX deposit requirement at CBRT $25bn Strong CAR, low NPL ratios
  • 69. (12-Month, %) External Debt Roll-Over Ratios Source: CBRT, BGC Partners 69
  • 70. Priorities & Structural Reforms 70
  • 71. Chapter- 1 Moving up the ValueChain Combatting Shadow Economy Deepening Capital Markets Improving Infrastructure 71
  • 72. Moving up the Value-Chain 72
  • 73. High Added Value in Exports Value of export products per kg Turquality Japan $3.5 Germany $4.1 $3.28 South Korea $3.0 Turkey $1.58 Strengthening the link b/w commerce and R&D
  • 74. Boosting R&D Why is R&D so significant for us? The share of high and medium-high technology sectors in production and in export is low 80 72.4 70 64.4 60 50 35.6 40 27.6 30 20 10 0 High and Medium-High Production Source: Ministry of Development Low and Medium-Low Export 74
  • 75. R&D Spending 2023 •3.00% 2018 •1.8% 2012 • 0.92% 2002 • 0.53% Source: The Scientific and Technological Council of Turkey 75
  • 76. Industrial Design Applications 41,220 applications in 2012 Up by 103% since 2002 Source: TPI
  • 77. Trade Mark Applications 2002 • 36,429 2012 • 111,143 Source: TPI
  • 78. 20 0 17 14 Poland Switzerland 14 Norway 16 Portugal 44 UK Spain 60 Italy Germany France Turkey (2012, Thousand) 120 Trade Mark Applications 111 100 86 80 64 54 40 41 78
  • 79. Patent Applications 11,599 12,000 11,000 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,874 1,000 2002 Source: TPI 2012
  • 80. Deepening Capital Markets 80
  • 81. A New Capital Markets Law New legal framework in line with the best global practices •Increasing financial deepening & innovation •Strengthening investor rights •Improving corporate governance 81
  • 82. Restructuring of Borsa Istanbul Regional Leadership Raising Market Cap/GDP to 80% 1,000 new companies to be listed 82
  • 83. Global Financial Centres Index 2018 25th 80 2013 44th 70 (2013) 60 2009 72nd 66 77 71 73 68 50 44 40 31 30 20 Rio de Jeneiro ISTANBUL Source: Global Financial Centres Index Mexico Mauritius Warsaw Prague Budapet
  • 84. Increasing Savings: Private Pensions 25% State Contribution 1.0 mn new participants and TL4.7bn funds since end-2012 Penalty for Early Withdrawals 84
  • 85. Incentives for Global Fund Managers Making it easier to manage assets in Turkey A tax free environment for Global Funds 85
  • 86. 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 86
  • 87. Incentives for Business Angels 87
  • 88. Combatting Shadow Economy 88
  • 89. Size of Shadow Economy (%, GDP) 32.2 33 Down 6 percentage points 31 30.4 30.7 31.5 32 27.7 28.3 28.4 29 28.9 29.1 30 27.2 28 26.5 27 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 26 Source: Schneider, 2013 89
  • 90. 10 5 25 20 15 Source: Schneider, 2013 27.6 Estonia 23.6 23.1 Greece Slovenia 18.4 EU Average 13.0 13.0 13.0 Denmark Finland Germany Netherlands Austria 7.5 8.0 9.1 United Kingdom Luxemburg 9.7 France 12.2 13.6 Norway Ireland 13.9 15.0 Slovakia Sweeden 15.5 Czech Rep. 16.4 18.6 Spain Belgium 19.0 21.1 Portugal Italy 22.1 23.8 Poland Hungary 24.3 25.2 S. Cyprus Malta 25.5 Lithuania 26.5 28.0 Latvia TURKEY 28.4 Crotia 9.9 30 Romania 31.2 35 28.4 Bulgaria Size of Informal Economy (2013, %, GDP) Size of Shadow Economy (%, GDP) But still higher than EU average 90
  • 91. Tax Loss Due to Informal Economy (% GDP) 5.7 5.3 6 5.3 5.7 6.3 7 6.8 7.1 7.5 7.5 7.4 7.3 8 7.8 9 2.8 2.5 2.6 3 2.9 3.1 3.3 3.4 3.5 3.4 3.4 3.4 4 3.6 5 Turkey 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 2 Sample Average 3ppt higher than the EU average Source: Schneider, 2012 91
  • 92. Combatting Informal Economy Action Plan for Fighting Informality 2011-13 Strengthening Capacity of Revenue Administration & Tax Audit Board Income Tax Reform and Tax Procedural Law 92
  • 93. Improving Infrastructure 93
  • 94. 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 (November 1, 2013) 2,244 Km Total of Motorways 20,601 Km Total of State and Provincial Dual Carriageways Total: 22,845 Km 94
  • 95. High Speed Railway Projects EDİRNE ZONGULDAK SAMSUN İSTANBUL TEKİRDAĞ AMASYA ÇANKIRI İZMİT Bandırma KARS KARABÜK 105 km BURSA ERZURUM BİLECİK 533 km Yenişehir ANKARA ERZİNCAN KIRIKKALE SİVAS ESKİŞEHİR BALIKESİR 405 km Yerköy Polatlı MUŞ AFYONKARHİSAR İZMİR MANİSA ELAZIĞ 212 km UŞAK NİĞDE 624 km MALATYA KONYA ISPARTA BATMAN MARDİN BURDUR OSMANİYE Completed (888 km) Under Construction (1796 km) Bidding Phase (454 km) Project Phase (354 km) DİYARBAKIR K.MARAŞ AYDIN DENİZLİ VAN KAYSERİ GAZİANTEP KARAMAN MERSİN ADANA Çobanbey 95
  • 96. Active Airports in Turkey 2003 2013 • The number of airports serving scheduled flights = 26 • The number of airports serving scheduled flights = 52 Airports serving Scheduled Flights (52) Airports under Construction (3) Airports Planned (1) 96
  • 97. Chapter- 2 Enhancing Human Capital Stock Increasing Labor Market Flexibility Reducing Energy Import Bill Enhancing Democratic Standards 97
  • 98. Enhancing Human Capital Stock 98
  • 99. Students (%, Total Population) 45 40 39 35 30 25 22 20 15 Turkey Source: TURKSTAT, Eurostat Included Informal Education EU 99
  • 100. Investment in Education Over the last decade, we have • Built 205,000 classrooms • Hired 400,000 teachers Source: Ministry of Education 100
  • 101. Gross Schooling Rates Source: Ministry of Development 101
  • 102. Share of Education Budget 18 18 16 % 14 12 10 9.4 8 2002 Source: Ministry of Finance 2014 102
  • 103. Enhancing Human Capital Stock: PISA Results, Gap b/w Turkey & OECD 80 76 74 75 70 65 60 55 50 51 47 46 45 38 40 35 30 Science Math 2006 Source: OECD 2009 2012 103
  • 104. Improving Quality of Education With Fatih Project, we are providing our children with Broadband Internet Access Smart Boards Tablet PCs Other Information Technology Tools 104
  • 105. Labor Market Flexibility 105
  • 106. 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 106
  • 107. Average Retirement Age 65 63.3 61.9 60 55 50 44.9 45 41.0 40 35 30 Female Male Turkey OECD Source: OECD 107
  • 108. Labor Participation Rate, Female 80 71.6 Labor Participation Rate by Education (2013 October) 70 OECD Average: 62,3 60 50 37.8 40 31.3 30.6 30 26.3 23.3 20 17.1 10 2004 Source: Turkstat, OECD Total Illeterate Less than high school High school Vocational high Higher education school 108
  • 109. Source: OECD Netherlands Denmark Norway Ireland Switzerland Germany Australia United Kingdom Sweden Belgium 40 Luxembourg Finland New Zealand Italy Austria France Spain Estonia Canada Chile Portugal Hungary Slovenia Iceland Poland Slovak Republic Israel Czech Republic Greece Mexico 50 Korea Turkey (2011, hour) Average Usual Weekly Hours Worked on the Main Job 48.9 48 46 44 42 OECD Average: 38.5 38 36 34 32 30 109
  • 110. Reducing Energy Import Bill 110
  • 111. (Brent, $ pbl) Energy Imports (Billion Dollars) Energy Import Bill Source: TURKSTAT, Bloomberg 111
  • 112. High Dependence on Energy Imports 72% Total Energy 92% 98% Oil Natural-Gas 112
  • 113. Developing Local & Renewable Resources Electricity Generation Installed Capacity MW Current Installed Capacity (Sept, 2012) 55,663 - Renewable Energy 20,963 Power Plants Under Construction 23,396 - Renewable Energy 15,879 TOTAL 79,029 - Renewable Energy 36,843 % of Total 37.7 67.9 46.6 Source: Ministry of Energy and Natural Resources 113
  • 114. Building the Nuclear Capacity Akkuyu: JW with Russia Sinop JW with a Japanese-French consortium Working on a 3rd plant 114
  • 115. Improving Energy Efficiency Construction 30% Industry 20% Transportation 15% 115
  • 116. Enhancing Democratic Standards Reconciliation Process New Democratization Package A Democratization Package A New Constitution 4th Judicial Reform Package EU Accession Process 116
  • 117. Strong Long-Term Prospects 117
  • 118. Average Real GDP Growth 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 118
  • 119. GDP Per Capita GDP Per Capita ($) 10 497 11 000 GDP Per Capita (₺, Real) 1 572 1 600 1 400 9 000 7 000 5 000 3 492 1 200 GDP Per Capita ($,PPP) 19 000 18 125 17 000 3 000 1 099 1 000 1 000 2002 2012 800 15 000 600 13 000 2002 2012 11 000 9 000 8 667 7 000 5 000 2002 Source: TURKSTAT 2012 119
  • 120. 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 120
  • 121. Determinants of Long-Term Growth Quality of Institutions Demographics Productivity 121
  • 122. 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 175 122
  • 123. Corruption Perceptions Index (2002) (65th among 102 countries) 100 96 90 80 70 58 73 74 59 Çin 40 44 45 Brezilya 50 Yunanistan 60 Meksika 65 70 31 30 Indonesia Russia Hindistan Arjantin TÜRKİYE İtalya 20 Source: Transparency International 123
  • 124. Corruption Perceptions Index (2013) (53rd among 177 countries) 140 127 130 114 106 94 80 80 69 70 80 Greece 90 China 100 60 106 Mexico 110 Argentina 120 72 53 50 Russia Indonesia India Brazil Italy TURKEY 40 Source: Transparency International 124
  • 125. Global Competitiveness Index (2005) (71 among 117 higher than Russia, Argentina and Greece. Within the period of 2005-2012, Turkey has rankedcountries) st 75 70 67 68 69 71 57 40 35 35 36 54 Argentina 45 45 Greece 43 47 India 50 59 Mexico 53 55 Russia 60 Brazil 65 48 38 31 Source: World Economic Forum TURKEY Indonesia Ukraine Romania China Poland Italy Slovak Rep. Hungary Portekiz 30 125
  • 126. Global Competitiveness Index (2013) (44th among 148 countries) 104 105 91 95 76 75 49 55 56 60 64 44 TURKEY 35 51 Portugal 42 45 Poland 55 Italy 65 63 78 Slovak Rep. 85 Romania 84 38 29 Source: World Economic Forum Argentina Greece Ukraine Russia Hungary India Brazil Mexico Indonesia China 25 126
  • 127. Ease of Doing Business (2006) 131 130 134 138 122 120 111 108 110 97 100 93 90 69 70 Italy Uruguay 84 80 70 132 Croatia 140 Ukraine (84th among 175 countries) 62 71 Source: World Bank India Indonesia Brazil Greece China Russia Argentina TURKEY Romania Mexico 60 127
  • 128. Ease of Doing Business (2013) (69th among 189 countries) 72 89 Crotia 60 65 69 134 96 73 Romania 80 Greece 88 Uruguay 100 92 120 Argentina 112 120 116 126 Indonesia 140 53 40 Source: World Bank India Brazil Ukraine China Russia TURKEY Italy Mexico 20 128
  • 129. 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 21 129
  • 130. Annual Average Population Growth Rate (%, 2001-11) Growth Rate of Working-Age Population Source: OECD, Eurostat, TURKSTAT 130
  • 131. Have Investors Noticed the Transformation? 131
  • 132. International Companies Operating in Turkey (1000s) Source: Ministry of Economy 132
  • 133. Foreign Direct Investment Inflows 140 123.3 (Billion dollar) 120 100 80 60 40 20 14.8 0 1980-2002 2003-2012 Source: CBRT 133
  • 134. (2003=100) REER Appreciation Source: CBRT 134
  • 135. Thank You… 135