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  1. 1. Mehmet Şimşek Minister of Finance October 21, 2014 Outlook for Turkey
  2. 2. Outline Political & Economic Outlook Priorities & Reform Agenda Long-Term Prospects 2
  3. 3. Political Outlook 3
  4. 4. Political Outlook Local Elections Presidential Elections Parliamentary Elections 4
  5. 5. ( %) 38.8 50 45 40 35 30 25 20 15 10 5 Source: Anadolu Agency AK PARTY: Justice and Development Party CHP: Republican People’s Party MHP: NationalistMovement Party BDP: Peace and Democracy Party 23.1 16.1 5.7 16.3 45.5 27.8 15.2 4.2 7.3 0 AK PARTY CHP MHP BDP Others 2009 2014 5 Local Election Results
  6. 6. 6 Presidential Election Results 9.8 51.8 38.4 RECEP TAYYİP ERDOĞAN EKMELEDDİN İHSANOĞLU SELAHATTİN DEMİRTAŞ Source: Supreme Electoral Council
  7. 7. ( %) Which party would you vote for if the 12.1 AK PARTY CHP MHP HDP Source: ANAR, September 2014 AK PARTY: Justice and Development Party CHP: Republican People’s Party MHP: NationalistMovement Party HDP: People’ s Democratic Party 7 3.3 8.2 24.7 51.7 0 10 20 30 40 50 60 Others elections were held today?
  8. 8. ( %) Which party would you vote for if the AK PARTY CHP MHP HDP Source: Optimar, September 18, 2014 AK PARTY: Justice and Development Party CHP: Republican People’s Party MHP: NationalistMovement Party HDP: People’ s Democratic Party 8 3.4 6.8 14.5 24.7 50.6 0 10 20 30 40 50 60 Others elections were held today?
  9. 9. Political Outlook Time to Deepen & Broaden the Reform Agenda Preparation Phase 2014- 2015 No Elections for the next Four Years Implementation Phase 2015 - 2019 9
  10. 10. 2015-19 Reform Initiatives 25 Transformation Areas 1,200 Micro Reforms 10
  11. 11. 11 Vision 2023 Political Stability Structural Reforms 2023 Targets
  12. 12. Macroeconomic Outlook 12
  13. 13. Macroeconomic Outlook Growth has Moderated Inflation Appears to have Peaked Fiscal Position Remains Strong External Balance is Improving 13
  14. 14. Growth has Moderated 14
  15. 15. Overperformed EMEA & LatAm, but Underperformed Asia EM Asia (excl. China & India) EM Europe 15 185 175 165 155 145 135 125 115 105 Source: TURKSTAT, IMF 181.6 168.8 100.0 159.0 153.0 152.2 143.8 95 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 TURKEY Russia LatAm South Africa
  16. 16. Edging up Towards High Income Group 12,615 4,085 3,492 10,807 12,229 1,035 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 High Income ( $ 12,616- and up) Higher - Middle Income ( $ 4,086-12,615) Lower - Middle Income ( $ 1,036-4,085) Low Income ( $ 1,035-or less) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: TURKSTAT, MTP, WB 16
  17. 17. Outlook for Growth Remains Positive 17 Turkey Emerging Europe Excl. Turkey EM's Excluding China & India Latin America 3.3 5.5 4.0 2.5 Source: IMF, MTP 2015-17 4.0 5.0 5.0 2.5 2.8 3.0 3.2 2.7 3.6 4.1 4.2 1.3 2.2 2.8 3.1 1.0 2014 2015 2016 2017 (%)
  18. 18. A more Balanced Growth 20 15 10 5 0 -5 -10 2010-Q1 Q2 Q3 Q4 2011-Q1 Q2 Q3 Q4 2012-Q1 Q2 Q3 Q4 2013-Q1 Q2 Q3 Q4 2014-Q1 Source: TURKSTAT 18 Q2 Final Domestic Demand Net Exports Change in Stocks GDP Growth (PPT)
  19. 19. Source: HSBC 19 PMI Recovers in September 50.0 50.4 30 35 40 45 50 55 60 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 (index)
  20. 20. Some Softening in Confidence Indices Source: Turkstat, CBRT 20 100 100 55 55 65 60 75 65 70 75 110 80 120 85 60 70 80 85 90 95 105 115 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Real Sector Confidence Index (s.a.) Consumer Confidence Index (rhs)
  21. 21. Risks to Growth Upside • Improving domestic financial conditions • Declining commodity prices Downside • Geopolitical tensions • Slower European recovery 21
  22. 22. Employment Growth 22 TURKEY Brazil Germany Russia Poland Hungary France Belgium Chezch Rebuplic Slovakia Slovenia Denmark USA Ireland Portugal Japan Italy Greece Spain Source: Eurostat, OECD, Turkstat 5.6 -4 -3 -2 -1 0 1 2 3 4 5 6 Euro Area Employment since 2007(mn people, s.a.)
  23. 23. Total Employment Employment since 2007 (mn people s.a.) Source:TURKSTAT 23 26 25.8 19 20 21 22 23 24 25 27 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14
  24. 24. Unemployment & Labor Participation Rates Source: TURKSTAT 24 8 44 9 45 10 46 11 47 12 48 13 49 14 50 15 51 16 52 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Unemployment Rate Labor Force Participation Rate (rhs) Source: Turkstat (s.a., %)
  25. 25. Inflation Appears to have Peaked 25
  26. 26. 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 (CPI, Annual, %) 26 Source: TURKSTAT
  27. 27. Factors behind High Inflation in 2014 Drought Geopolitics (Iraq, Syria, Russia) Exchange Rate Weakness Deterioration in Expectations 27
  28. 28. 28 Worst Drought over the Last 13 Years Drought Analysis (1972-2014 )* Source: Turkish State Meteorological Service * Indicates deviation from the last 12-month-mean in June. (12-month) HUMID NORMAL DRY Unusually humid Extremely humid Very humid Fairly humid Slightly humid Normal Slightly dry Fairly dry Very dry Extremely dry Unusually dry
  29. 29. Food & Non-Food Prices Source: TURKSTAT, CBRT 29 (CPI, Annual, %) 2 4 6 8 10 12 14 16 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Food Non-Food
  30. 30. Food & Beverage in the Consumption Basket 30 (Weıght in CPI (%) 24.5 26 24 22 20 18 16 14 12 10 8 TURKEY Poland Portugal Greece Hungary Spain Mexico Chezch Rep. Italy France Ireland Source: OECD
  31. 31. Factors Distorting Food Prices Structural • Intermediation chain • Low productivity • Limited storage capacity Cyclical • Drought • Commodity prices • Geopolitical tensions 31
  32. 32. Delayed Impact of Exchange Rate Weakness 170 160 150 140 130 120 110 100 90 Nov-10 Nov-11 Nov-12 Nov-13 Turkey EM Avarage Exchange Rate relative to USD (01.11.2010=100) Source: Bloomberg EM Average: Czech R., Hungary, Poland, S.Africa, Indonesia, S.Korea, Brazil, Chile, Colombia, Mexico Import Prices in TL Import Prices in USD Import Price Index (2010= 100) Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 May-14
  33. 33. Deterioration in Inflation Expectations 33 7.4 7 6.8 4 5 6 8 9 10 Apr-06 Agu-06 Jan-07 May-07 Oct-07 Feb-08 Jul-08 Nov-08 Apr-09 Aug-09 Jan-10 May-10 Oct-10 Feb-11 Jul-11 Nov-11 Apr-12 Aug-12 Jan-13 Oct-13 Jul-14 12 Months 24 Months Inflation Expectations (%) Source: CBRT
  34. 34. 34 Geopolitical Tensions & Inflation Outlook Exchange rate depreciation around 10% 1.5ppts increase in inflation $10 increase in energy prices 0.4ppt increase in inflation 1,6 million refugees Pressure on Food & Rental Prices Source: Kara, Hakan and Öğünç F. (2011). "Effect of Exchange Rate and Import Prices on Inflation", CBRT, Economic Notes, No. 2011/14., UNHRC
  35. 35. Inflation Outlook Upside • TL Depreciation Downside • Output Gap • More Moderate Credit Growth • Weaker Commodity Prices 35
  36. 36. Fiscal Position Remains Strong 36
  37. 37. Sustaining a Solid Fiscal Position 10.8 7.9 4.1 Maastricht Criteria: 3% 0.1 -1.3 0.2 1.6 5.5 3.0 0.4 1.0 0.7 0.8 0.5 0.2 -0.1 12.0 10.0 8.0 6.0 4.0 2.0 0.0 -2.0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Satisfied Maastricht Criteria except 2009 Source: Ministry of Development 37 Budget Deficit (%, GDP) Medium-Term Program (2015-17)
  38. 38. Budget Deficit (2014) Budget Deficit (%, GDP) 3.9 4.5 4 3.5 3 2.5 2 1.5 1 Source: IMF, OECD, Ministry of Development 3.0 2.1 0.8 0.5 OECD EU-28 EMs TURKEY 38 Maastricht Criteria: 3%
  39. 39. Arm Bra Phil Lith Mex Bul Col Fr Cro Hun Indo Irl Latv Pol Rom Rus Serb Slvk Slov SoAf Esp TR Arg Chi Ind Ukr Ven 120 100 80 60 40 20 0 0 2 4 6 8 10 12 14 16 Fiscal Deficit (%, GDP) Gross Public Debt (%, GDP) Source: IMF, Ministry of Deveopment Fiscal Strength, 2014
  40. 40. 74.0 67.7 Lower Public Debt 59.6 52.7 46.5 39.9 Maastricht Criteria: 60% 40.0 46.1 42.3 39.1 36.2 36.2 Medium-Term Program 33.1 31.8 30.0 28.5 75 70 65 60 55 50 45 40 35 30 25 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Debt-to-GDP, % Satisfying Maastricht Criteria since 2004 Source: Treasury 40 (2015-17)
  41. 41. Public Debt (2014) Debt-to-GDP, % 111.1 120 110 100 90 80 70 60 50 40 30 Source: IMF, OECD, Treasury 89.1 40.1 33.1 20 OECD EU-28 EMs TURKEY 41 Maastricht Criteria: 60%
  42. 42. Fiscal Outlook Upside • Conservative revenue assumptions • Outperformance in non-tax revenues • Improving tax compliance 42 Downside •Weaker domestic demand • Higher VAT rebates
  43. 43. External Balance is Improving 43
  44. 44. Exports are Growing faster than Imports 44 (6- month-moving average, y/y, %) Source: TURKSTAT
  45. 45. C/A Deficit is Narrowing (%, GDP) 2 0 -2 -4 -6 -8 -10 Net Gold Trade • 2012: +$5.7 billion • 2013: -$11.8 billion • 2014 August: -$3.2 billion 2010-Q1 2010-Q2 2010-Q3 2010-Q4 2011-Q1 2011-Q2 2011-Q3 2011-Q4 2012-Q1 2012-Q2 2012-Q3 2012-Q4 2013-Q1 2013-Q2 2013-Q3 2013-Q4 2014-Q1 2014-Q2 C/A Deficit C/A Deficit excl Energy C/A Deficit excl Energy & Gold Source: CBRT 45
  46. 46. Financing of C/A Deficit is Improving (12 Month Rolling, USD bn) Source: CBRT 46
  47. 47. Outlook for C/A Deficit Upside • Geopolitical tensions • Sluggish European Recovery Downside • Softer domestic demand • Lower energy prices 47
  48. 48. Geopolitical Tensions: Direct Impact Trade Balance Syria $0.9bn Kuwait $0.04bn Ukraine -$2.3bn Russia -$18.1bn Iraq $11.8bn Iran -$6.2bn 48 10% decline in Turkey’s exports to Iraq A 0.2 ppt-increase in Turkey’s C/A deficit-to-GDP UAE -$0.4bn Saudi Arabia $1.2bn Bahrain $0.03bn Oman $0.2bn Qatar -$0.1bn
  49. 49. Geopolitical Tensions: External Demand 49 (Export, 2008=100) Source: TURKSTAT 0 50 100 150 200 250 300 350 400 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 May-14 Egypt Iraq Libya
  50. 50. Strong Linkage b/w Exports to EU & European Growth 50 (YoY, %) 35 30 25 20 15 10 5 0 -5 -10 Source: TURKSTAT, Eurostat 3 2.5 2 1.5 1 0.5 0 -0.5 -1 -15 2010-Q1 2010-Q2 2010-Q3 2010-Q4 2011-Q1 2011-Q2 2011-Q3 2011-Q4 2012-Q1 2012-Q2 2012-Q3 2012-Q4 2013-Q1 2013-Q2 2013-Q3 2013-Q4 2014-Q1 2014-Q2 Exports to EU EU Growth (rhs) (%)
  51. 51. Strong linkages with EU 51 Exports (%) FDI (%) Source: TURKSTAT, CBRT 2013 56.6 43.4 EU Others 74.8 25.2 EU Others
  52. 52. Turkey's FX Position Billion $ Assets Liabilities Net Position Public Sector* 136,2 121,9 14,4 Banking Sector** 491,3 492,3 -1,0 Real Sector*** 99,1 278 -178,9 Short Term 84,3 94,7 -10,5 Household**** 191,0 0,5 190,5 FX Deposit ***** 83,7 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 16 Oct., 2014; data from gross external debt stock as of Q1-14 ** Data – August. 2014 *** Data – July 2014 **** Data - Mar. 2013 52 *****Data-03.10.2014
  53. 53. Reserves are back at 2013 levels 53 (USD bn) Source: CBRT 133,2
  54. 54. Turkey’s Banks: among the Strongest in EMs Source: World Bank 54
  55. 55. Corporate FX Exposure is Moderate No FX Loans 63% FX Loan w/o export earning 12% FX Loan w/ export earning 25% Source: CBRT *The data above have been calculated over 9,468 firms whose total turnover corresponds to 71% of GDP. 55
  56. 56. Low Household Leverage (Household Liabilities, % of GDP, March 2014) Lithuania TURKEY Latvia Hungary Slovenia Slovakia Czech Republic Poland Estonia Italy Austria Belgium Germany Luxembourg France Malta Euro Area Greece Spain Sweden Portugal United Kingdom Source: CBRT, ECB 56 No FX exposure 63.9 23.0 0 20 40 60 80 100 120 140 Denmark
  57. 57. Risk Perception Remains High Source: Bloomberg EM Average: Czech R., Hungary, Poland, S.Africa, Indonesia, S.Korea, Brazil, Chile, Colombia, Mexico 57 50 100 150 200 250 300 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Turkey EM Average (5-y CDS, pt)
  58. 58. 0 10 20 30 40 50 60 70 80 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 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. 58 Volatility (%) * Emerging Economies** Turkey Exchange Rate Volatility also Remains High
  59. 59. Priorities & the Reform Agenda 59
  60. 60. Priorities & Reform Agenda to Boost Productivity Improving Macroeconomic Performance Improving Quality of Institutions Enhancing Human Capital Stock Improving Infrastructure Increasing Access & Quality of Health Services Enhancing Competition Increasing Labor Market Flexibility Deepening Capital Markets Investing in Local & Renewable Energy Enhancing Technological Readiness & Innovation Combatting Shadow Economy Narrowing Regional Development Gaps 60
  61. 61. Improving Macroeconomic Performance Lower inflation rate Lower current account deficit Lower debt & deficit ratios Maintaining a healthy banking sector Higher labor participation & employment ratios Higher & sustainable growth 61
  62. 62. 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: 45th in 144 2005: 71st in 117 Source: WB, WEF, Transparency International 62
  63. 63. 25 20 15 10 5 Source: Ministry of EU Affairs 63 EU Accession Process (Chapters) 14 20 0 Opened Remaining
  64. 64. Ehnancing Human Capital Stock 64
  65. 65. Share of Education in Budget 9.4 18 18 16 14 12 10 8 2002 2014 % Source: Ministry of Finance 65
  66. 66. Gross Schooling Rates 11.7 130 110 90 70 50 30 Source: Ministry of Development 96.5 80.8 35.8 44.0 107.6 96.8 92.1 10 Preschool (age of 4-5 ) Primary School Secondary School Higher Education 2002-03 2012-13 66
  67. 67. Enhancing Human Capital Stock: PISA Results, Gap b/w Turkey & OECD 76 74 47 51 38 46 80 75 70 65 60 55 50 45 40 35 30 Science Math 2006 2009 2012 Source: OECD 67
  68. 68. Improving Infrastructure 68
  69. 69. Infrastructure Fuels the Economy Infrastructure development has the potential to* • Promote growth • Increase equity • Reduce poverty 1% increase in road network may increase productivity by 0.5ppt** 69 * Calderon and Serven 2010. ** Infrastructure Fedderke and Kaya (2013)
  70. 70. January 2003 1.714 Km Total of Motorways 4.387 Km Total of State and Provincial Dual Carriageways 6.101 Km Total October 2014 2.244 Km Total of Motorways 21.278 Km Total of State and Provincial Dual Carriageways 23.522 Km Total Highway Network Source: Ministry of Transport
  71. 71. İSTANBUL EDİRNE ESKİŞEHİR ANKARA Polatlı 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 405 km 212 km 533 km 624 km 105 km Completed (888 km) Under Construction (1796 km) Bidding Phase (454 km) Project Phase (354 km) GAZİANTEP Çobanbey 71 High Speed Railway Projects
  72. 72. Future Railways Investments By 2023 $ 45 billion worth of investment 10,000 km of new high speed railway network 4,000 km of new conventional line 72
  73. 73. # of Airports • 53 up from 26 in 2002 The 3rd Airport in Istanbul • 150 million passengers An area of 90 million m2 Construction Cost: €10 billion Rent (25 Years): €22.2 billion 73
  74. 74. Projects of the Century - Under Construction Tube Tunnel 3rd Bridge Izmit Gulf Transit Istanbul-İzmir Highway High-Speed Train through Ankara-Bursa-Istanbul 74
  75. 75. Increasing Access & Quality of Health Services 75
  76. 76. Healthcare: Targets Increase the number of healthcare facilities Enhance the quality of the healthcare services Apply state-of-the-art technologies in the hospital management 76
  77. 77. Healthcare Expenditures Source: Ministry of Finance 77
  78. 78. Healthcare Indicators (Years) 72 77 78 76 74 72 70 2002 2013 Infant and Maternal Mortality Rate 31.5 7.4 6.4 1.5 35 30 25 20 15 10 5 Source: The Ministry of Health 78 7 6 5 4 3 2 1 0 0 2002 2013 Infant Mortality Rate (Left Axis) Maternal Mortality Rate (Right Axis) (per thousand) (per ten thousand) Life Expectancy At Birth
  79. 79. Tax Incentives for Healthcare Exports 18% VAT down to 8% 50% tax relief on CIT & PIT for exports in healthcare services PIT and CIT exemption for 5 years on proceeds gained from operating rehabilitation centers Regional Investment Incentives 79
  80. 80. Increasing Labor Market Flexibility 80
  81. 81. Labor Market Reform Reducing labor market rigidities Improving quality of education Increasing the link b/w education & labor markets Increasing female labor market participation rate 81
  82. 82. Employment Protection Legislation Index Source: OECD,2013.
  83. 83. (2004=100) 130 125 120 115 110 105 100 95 90 85 80 75 Female Labor Participation Rates 2004 2005 2006 2007 2008 2009 2010 2011 2012 TURKEY South Africa Croatia Hungary Poland Brazil Russian Federation Indonesia China Mexico India Source: TURKSTAT, Eurostat, WB TURKEY 83
  84. 84. Labor Participation Rate, Female 80 70 60 50 40 30 20 Source: Turkstat, OECD 84 Labor Participation Rate by Education (2014 June) OECD Average: 62,7 23.3 30.8 41.0 16.6 26.6 31.3 40.8 69.6 10 2004 Total 2023 Illeterate Less than high school High school Vocational high school Higher education
  85. 85. Labor Participation Rate, Female Female Labor Participation Rate (%) Income per Capita (log) Source: Fraker, A. and D. Ozdemir, 2011, “Female Labor Force Participation How Does Turkey Compare?”, TEPAV 85
  86. 86. 86 Labor Participation Rate, Female Source: ILO, WDI
  87. 87. Deepening Capital Markets 87
  88. 88. Financial Markets Source: TBU 162 106 98 210 82 69 230 210 190 170 150 130 110 90 70 50 Global EMs Turkey Bank Assets Capital Markets (nominal value, % GDP, 2012)
  89. 89. Borsa Istanbul Free-Float 28 Most Turkish companies are privately owned 80 70 60 50 40 30 20 Source: Capital Markets Board, Central Securities Depository 70 10 Turkey EM Average (%) 89
  90. 90. Deepening Capital Markets in Turkey 90 A New Capital Markets Law Restructuring of Borsa Istanbul Istanbul as a Financial Center Incentives for • Business Angels • Global Fund Managers • Venture Capital • Private Pensions
  91. 91. Project Targets 91 Istanbul Top 25 in the Global Finance Centers Index Source: 10th Development Plan Turkey Top 30 in the Financial Development Index
  92. 92. 40 Global Financial Centres Index 42 44 45 63 68 77 80 70 60 50 40 30 20 Buenos Aires ISTANBUL Mexico Rio de Jeneiro Prague Warsaw Budapest (2014) 2009 72nd 2014 42th 2018 25th Source: Global Financial Centres Index 16
  93. 93. Financial Development Index (2012) Source: The Financial Development Report 2012 93 44 43 42 37 35 32 25 27 29 31 33 35 37 39 41 43 45 Hungary Mexico Turkey Poland Czech Republic Brazil 2009: 44th (55 countries) 2012: 42nd (62 countries) 2018: 30th
  94. 94. Investing in Local & Renewable Energy 94
  95. 95. High Dependence on Energy Imports 74% Total Energy 92% Oil 98% Natural-Gas 95
  96. 96. Source: TURKSTAT, Bloomberg Energy Import Bill Energy Imports (Billion $) (Brent, $ pbl) 96
  97. 97. Turkey: Developing Local & Renewable Source: Ministry of Energy and Natural Resources 97 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 3-to-5 years 78,382 - Renewable Energy 36,401 46.4
  98. 98. Technological Readiness & Innovation 98
  99. 99. 99 Need to Move up the Value Chain 3.5 24.1 33.2 39.1 3.7 31.4 31.5 33.5 45 40 35 30 25 20 15 10 5 0 High-technology Medium high-technology Medium low-technology Low-technology Production Exports (% 2012) Source: Ministry of Development
  100. 100. R&D Spending* Source: The Scientific and Technological Council of Turkey * % of GDP 100 2002 0.53% 2012 0.92% 2018 1.8% 2023 3.00%
  101. 101. Tax Incentives for R&D R&D Expenditure • Corporate income tax relief • Personal income tax relief • State contributions to social security premiums • Exemption from stamp duty • Capital support for young entrepreneurs Strengthening the link b/w R&D and Commercial Activities • 50% tax relief on commercial use of patents, trademarks… • VAT exemption on patents, trademarks… 101 Since 2008, 155 R&D Centers
  102. 102. Patents, Industrial Designs & Trade Mark Applications Patent applications 2013: 12,053 2002: 1,874 Industrial design applications 2013: 45,039 2002: 20,302 Trade Mark applications 2013: 108,608 2002: 36,429 102
  103. 103. Combatting Shadow Economy 103
  104. 104. Informal Employment (% of Total Employment) Informal Employment 52.1 51.7 50.1 48.2 47.0 45.4 43.5 43.8 43.3 42.1 39.0 36.7 36.4 55 50 45 40 35 30 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Jul.-2014 Source:TURKSTAT 104
  105. 105. Size of Shadow Economy 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 105 (%, GDP)
  106. 106. Size of Shadow Economy Source: Schneider, 2013 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 But still higher than EU average 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 EU Average Belgium Czech Rep. Slovakia Sweeden Norway Denmark Finland Germany Ireland France United Kingdom Netherlands Luxemburg Austria (2013, %, GDP) 106
  107. 107. Narrowing Regional Development Gaps 107
  108. 108. Reducing Regional Development Gaps 108 26 Development Agencies GAP Action Plan • 41.2 billion TL to GAP (2003-14) • Creation of 584 thousand new jobs over the last 6 years. • Reduction of the unemployment rate to 14.5% in 2013. The Other Regional Development Projects (DAP, KOP, DOKAP) • 88 billion TL to 35 provinces in these Projects (2002-14) New Investment Incentives Scheme • Regional Incentives • In the 6th Region additional support for • The employee’s share of insurance premium • Income Tax Stoppage
  109. 109. Turkey’s Macro Fundamentals & Long-Term Prospects 109
  110. 110. 110 Rapidly Growing Economy 3.0 5.0 5.5 5.0 4.5 4.0 3.5 3.0 2.5 1993-2002 2003-13 Real GDP (%) Source: TURKSTAT
  111. 111. Determinants of Long-Term Growth Quality of Institutions Demographics Productivity 111
  112. 112. Favorable Demographics Share of 15-24 years old in Total Pop. (%) Azerbaijan Turkey Moldova Georgia Macedonia Iceland Montenegro Lithuania Malta Norway Slovakia United Kingdom Sweden Denmark Poland Ukraine Netherlands Finland Luxembourg Hungary Austria France Latvia Estonia Croatia Ireland Switzerland Serbia Czech Republic Germany Bulgaria Portugal Greece Slovenia Andorra Italy Source: Eurostat 16.6 7 9 11 13 15 17 19 21 Spain 112
  113. 113. 1.7 0.7 0.2 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 TURKEY OECD EU-28 Annual Average Growth Rate (%, 2001-13) Working Age Population Growth Source: OECD, Eurostat, Turkstat 113
  114. 114. GDP 2002 Source: TURKSTAT, Medium-Term Program,PwC 2050 2002 $ 230 billion 2050 $ 5 trillion 2013 $ 822 billion 2023 $ 2 trillion 114
  115. 115. THANK YOU… 115
  • SydneyGaneb

    Jul. 18, 2017
  • farihaansari26

    Oct. 23, 2014

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