Outlook of Turkey

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Outlook of Turkey

  1. 1. Turkey: Economic OutlookJune 6, 2012Mehmet ŞimşekMinister of Finance1
  2. 2. OutlineREBALANCING ON GOINGNear-Term OutlookManaging a Soft LandingKeeping Inflation underControlMedium and Long-Term Outlook2
  3. 3. Turkey Towards 20503
  4. 4. Towards 2050…In 2050, ourpopulation will reach100 million and ournational income willreach 5.2 trilliondollars.Resource: UNFPA, PwCIn 2011, ourpopulation was75 million andour nationalincome was 772billion dollar.
  5. 5. Various Developed Countries Will Fall Behind TurkeySource: IMF, PricewaterhouseCoopers1. USA2. China3. Japan4. India5. Germany6. Russia7. UK8. Brazil9. France10. Italy11. Mexico12. South Korea13. Spain14. Canada15. Indonesia16. Turkey17. Iran18. Australia19. Taiwan20. Poland20102050TurkeyItalySpainCanadaSouthKorea
  6. 6. Income Range Will TightenIncomePerCapita(Dollar)Source: Goldman Sachs
  7. 7. NEAR-TERM OUTLOOKMANAGING A SOFT LANDING7
  8. 8. Very Strong Recovery, butModeratingSource: TURKSTATRealGDP(s.a,,2008Q1=100)9510087111808590951001051101152007-Q1Q2Q3Q42008-Q1Q2Q3Q42009-Q1Q2Q3Q42010-Q1Q2Q3Q42011-Q1Q2Q3Q48
  9. 9. 15,05,9-5,21,9-6-14914H1-11 H2-11Domestic Demand Net ExportsRebalancingContributiontoGrowth,%Source: TURKSTAT
  10. 10. Composite Leading Indicator Edging UpSource: Central Bank of Turkeypoints to Recovery in Q2107075808590951001051101152007-13579112008-13579112009-13579112010-13579112011-13579112012-13(Index)
  11. 11. Real Sector Confidence is StrongSource: Central Bank of Turkey 114050607080901001101201302007-13579112008-13579112009-13579112010-13579112011-13579112012-135(Index)
  12. 12. 13weekmovingavg.,y-on-y%Credit Growth is RecoveringSource: Central Bank of Turkey.Note: Credit Growth is adjusted for exhange movements.Jan.Feb.Mar.Apr.May.Jun.Jul.Aug.Sep.Oct.Nov.Dec.1224,801020304050602012 2011 2007-2011 Average
  13. 13. Employment is Supportive of GrowthSource: TURKSTATAdditionalEmploymentsinceend-2007(MnPeople,s.a.)1320.00021.00022.00023.00024.00025.0002008-12009-12010-12011-12012-1
  14. 14. Employment is Supportive of Growth143,9-5,0-4,0-3,0-2,0-1,00,01,02,03,04,05,0IrelandSpainGreeceIcelandDenmarkEstoniaPortugalJapanSloveniaItalyUnitedStatesFinlandFranceUnitedKingdomSlovakRepublicCzechRepublicNetherlandsNewZealandAustriaCanadaGermanyKoreaBelgiumNorwaySwitzerlandSwedenAustraliaIsraelSingaporeTurkeyAnnualAverageEmploymentGrowth(%,2007-2011)Source: WEO, TURKSTAT
  15. 15. UnemploymentRate,s.a.(December2007=100)80901001101201301401502007-122008-122009-122010-122011-12Source: Eurostat, TURKSTATEuro AreaTurkeyEU 27Unemployment at Decade Low,15
  16. 16. Inflation16
  17. 17. Inflation Rates (1980-2012,%)107,2125,599,18,3020406080100120140 198019811982198319841985198619871988198919901991199219931994199519961997199819992000200120022003200420052006200720082009201020112012From double digit tosingle digit ratesSource: Central Bank ofTurkey17
  18. 18. Why is inflation likely to fall?18Domestic demand is under controlCommodity prices are fallingExchange rate has been stableMonetary policy remains tight
  19. 19. Current Account Deficit19
  20. 20. Current Account Deficit…(12MonthRolling,USDbn)Source: Central Bank of Turkey20Large but Narrowing-80.000-70.000-60.000-50.000-40.000-30.000-20.000-10.000010.00020.0002002-147102003-147102004-147102005-147102006-147102007-147102008-147102009-147102010-147102011-147102012-1Current AccountNon Energy Current AccountCurrent Account + Net FDI + Net Errors and Omissions
  21. 21. Exports are holding up Well; Imports are FallingSource: TURKSTAT12MonthRolling,y-on-y%-5-4-3-2-10123452008-12009-12010-12011-12012-1Export Import21
  22. 22. Improving Financing22-1001020304050607080902007-13579112008-13579112009-13579112010-13579112011-13579112012-13FDI and Long-Term Debt Portfolio and Short-Term Debt Current Account DeficitSource: CBRT(12MonthRolling,USDbn)
  23. 23. Tighter Credit Conditions Supportive of Adjustment23Current AccountDeficit /GDP∆ Credit Stock / GDP (Right axis)CreditGrowthandCurrentAccountDeficit(%,12monthcumulative)Source: Central Bank of Turkey
  24. 24. REER still Supportive of AdjustmentSource: Central Bank of Turkey808590951001051101151201252003-12004-12005-12006-12007-12008-12009-12010-12011-12012-1Period AverageCPI-DevelopingCountries-BasedREER(2003=100)24
  25. 25. Europe56,6%Other43,4%Exports 200225Diversifying away from Europe?Europe41,0%Other59,0%Exports Jan-Apr 2012Source: TURKSTAT
  26. 26. Source: TURKSTATMENA: life saver?2612,126,60510152025302002 2012-Q1ExportstoMENA(%ofTotal)
  27. 27. 832051015202530352000 2011Source: TURKSTATExport DiversificationNumber of Products over $1 billion27
  28. 28. 530051015202530352000 2011Source: TURKSTATNumber of Countries over $1 billion28Export Diversification
  29. 29. Current Account Deficitas a Structural Problem29
  30. 30. Source: Ministry of Development, BloombergEnergy Import Bill(BrentType,Dollar/Barrel)EnergyImports(BillionDollars)02040608010012001020304050602002 2003 2004 2005 2006 2007 2008 2009 2010 2011Energy Import Oil Prices92354111
  31. 31. Core Issue: Competitiveness31MYR TWDHKDKRWILSCNYCLPTHBPLNCZKZARBRLIDRHUFMXNUYUINRLKRCOPSKKRUBRONPHPTRYy = 8,1785x - 36,575R² = 0,4061-12,00-8,00-4,000,004,008,0012,004 4,2 4,4 4,6 4,8 5 5,2 5,4 5,6Source: IMF, WEFCAD/GDP(%)WEF Competitiveness Score (2011-12)
  32. 32. Massive Savings-Gap32(%)10121416182022242002 2003 2004 2005 2006 2007 2008 2009 2010 2011Gap Investment/GDP Savings/GDP
  33. 33. Falling Private Savings33-505101520252002 2003 2004 2005 2006 2007 2008 2009 2010 2011Public Savings/GDP Private Savings/GDP(%)
  34. 34. Restoring Fiscal Health34
  35. 35. Lower Deficit0123456789101994-2002 2003-20117.73.3Source: Ministry of FinanceBudgetDeficit-to-GDP,%Achieved Maastricht Criteria except 2009
  36. 36. Lower DebtSource: TreasurySatisfying Maastricht Criteria since 200477,939,432,020304050607080200120022003200420052006200720082009201020112012*2013*2014*Debt-to-GDP,%
  37. 37. Domestic Debt StockSource: Treasury1983 199231941992 2002194149.8702002 2011149.870368.7781983-19921992-20022002-2011MillionTLMillionTLMillionTL
  38. 38. Zeroing Net Public Sector External DebtSource: Treasury88.401020304050607080902002200320042005200620072008200920102011(BillionTL)
  39. 39. Lower Interest Rate Risk39Source: Treasury2012 April200344%47%9%Fixed Floating CPI Indexed52%30%18%Fixed Floating CPI Indexed
  40. 40. 4041,972,458,127,6203040506070802002 2011TL Stock FX StockLower FX RiskSource: TreasuryCentralGovernmentDebtStock(%)
  41. 41. Lengthening Maturity of Domestic Borrowing*41MaturityofDebt(Months)* CashSource: Treasury9,444,7813182328333843482002 2011
  42. 42. Dealing with Low Private Savings42
  43. 43. Increasing Private Pensions25% State ContributionThe longer you stay in the privatepension, the more is the Statecontribution.43
  44. 44. What else are we doing?44Simplifying Tax SystemImproving Financial LiteracyIstanbul as a Financial CenterR&D and InnovationEducationInfrastructure
  45. 45. Simplifying Tax SystemBuilding a Simple and Effective Tax system• Boosting competitiveness• Widening tax base• Increasing tax predictability• Reducing tax rates on financial transactions &intermediation• Unifying tax burden on similar financial transactions45
  46. 46. Improving Financial LiteracyState run programs in countrieslike Australia, Japan, USA & UK46It is all about perception• Stock market – not a casino?• Financial education is key to making informed andeffective decision
  47. 47. New Incentives forIstanbul as a Finance Center47
  48. 48. Boosting Asset Management in IstanbulVenture CapitalBusiness AngelsIncreasing Private Pensions48
  49. 49. Incentives for Global Fund ManagersA tax free environment for Global Funds49Making it easier to manage assets in Turkey
  50. 50. Incentives for Venture Capital• 10% of VC Revenues• 20% of VC CapitalAllowing Venture Capital to be deducted fromCorporate & Personal Income Tax Base, up to50Tax Relief from Dividends
  51. 51. Incentives for Business Angels5175% income tax relief onAngel Capital100% tax relief forR&D and InnovationIncome & Withholding TaxRelief on divestment of stocks
  52. 52. Revising Capital Markets Law52A new law with amarketperspectiveRestructuring ofISE•Regional Leadership•Raising Marketcap/GDP to 80%•1,000 newcompanies
  53. 53. SukukGlobal issuance: $170 bnTreasury plans to issue SukukSimilar to euro bonds, international holders ofSukuk will not be subject to withholding tax53
  54. 54. R&D and Innovation54
  55. 55. Boosting R&D InnovationCreatingBrand NamesMoving up the Value Chain55
  56. 56. Why is R&D so significant for us?The share of high and medium-hightechnology sectors in production and inexport is lowBoosting R&DSource: Ministry of Development27,672.435,664.401020304050607080High and Medium-High Low and Medium-LowProduction Export56
  57. 57. •0.842010•0.532002R&D spending to GDP rose by 58 %Source: The Scientific and Technological Council of Turkey57
  58. 58. Industrial Design Applications36,578 applications in 2011Up by 80 % since 2002Ranking 3rd in EuropeSource: TPI58
  59. 59. Trademark Applications• 36,5782002• 117,4442011Source: Turkish Patent Instıtute59
  60. 60. 60Rising Patent Applications in Turkey10,010,511,011,512,012,513,0Turkey World12,710,72011RiseinPatentApplications(%)Source: World Intellectual Property Organization
  61. 61. Improving Quality of Human Capital61
  62. 62. We againallocated thelargest shareto education inthe 2012budget.Resources Allocated to EducationSource: Ministry of FinanceEducation is our priority.BillionTL62
  63. 63. Improving Girls’ Education2002 201291 girls per100 boys100.4 girls per100 boys63
  64. 64. Improving Quality of EducationWith Fatih Project, we are providing our children withBroadband Internet AccessSmart BoardsTablet PCsOther Information Technology Tools64
  65. 65. Enhancing Physical Infrastructure65
  66. 66. 1,714 KmTotal of Motorways4,387 KmTotal of State andProvincial DualCarriagewaysTotal: 6,101 KmDual CarriagewayNetwork(January 1, 2003)2,236 KmTotal of Motorways18,991 KmTotal of State andProvincial DualCarriagewaysTotal: 21,227 KmDual CarriagewayNetwork(March 15, 2012)Before 2003, only 6 cities were connected to each other via dual carriageway. Now, we have 74 cities21,227 Km3,125 Km3,061 Km27,413 KmDual carriageways put into serviceDual carriageways under constructionDual-carriageways to be put out to tenderTotal66
  67. 67. Investing in Railways AgainPRE-REPUBLIC RAILWAY NETWORK 4,136 km MAINLINEEARLY YEARS OF THE REPUBLIC (1923-1950) 3,764 km MAINLINE (134 km on annual average)1951-2002 945 km MAINLINE (18 km on annual average)2003 DEN GÜNÜMÜZE KADAR (2010 dahil) 1.076 km ANAHAT (Yılda Ortalama 135 km)UNDER CONSTRUCTION 2,047 km MAINLINE2003-2010 1,076 km MAINLINE (135 km on annual average)İSTANBULEDİRNEESKİŞEHİRPOLATLIANKARAKONYAİZMİRSİVASAFYONKAYSERİBURSA ERZİNCANERZURUMKARSMERSİNADANA GAZİANTEPDİYARBAKIRELAZIĞMALATYAZONGULDAKSAMSUNBANDIRMAVANTATVAN2010 : 11.940 km ( Konvansiyonel + Yüksek Hızlı )AdapazarıSource: Ministry of Transport2010:11.940 km (Conventional+High Speed)67
  68. 68. High Speed Railway Projects68İSTANBULESKİŞEHİR POLATLIANKARAKONYASİVAS212km533km405kmYOZGATHST Lines under Construction: ESK-İST and ANK-SİVASCompleted High Speed Train (HST) Lines: ANK-Eskişehir and ANK-KonyaYerköyHST at tender phase : Ankara-İzmir and Ankara-BursaAFYONİZMİRMANİSA 624kmBURSABİLECİK110 km
  69. 69. Passenger Traffic at the AirportsNumber of FlightsSource: General Directorate of State Airports Authority0200.000400.000600.000800.0001.000.0001.200.0001.400.0002003 2011154.218292.816218.405462.881156.582579.488529.2051.335.185Overflıght International Domestic Total020.000.00040.000.00060.000.00080.000.000100.000.000120.000.000Domestic International9.147.43958.258.32425.296.21659.362.14534.443.655117.620.469Domestic International Total69
  70. 70. It seems like we are on the Right TrackCombattingcorruptionCreating a levelplaying fieldImprovinginternationalcompetitiveness70
  71. 71. Combatting CorruptionCorruption Perceptions Index020406080100120140160TURKEYITALYBRAZILCHINAGREECEINDIAARGENTINAINDONESIAMEXICORUSSIA616973 758095 100 100 1001432011(among 183 countries)2002(among 102 countries)0102030405060708090100ITALYGREECEBRAZILMEXICOCHINATURKEYARGENTINAIDNIARUSSIAINDONESIA3144 455859 657073 7496Source: Transperancy Intenational71
  72. 72. 0102030405060708090CHINAITALYINDONESIABRAZILINDIAMEXICOTURKEYRUSSIAARGENTINAGREECE2643465356 5859668590Within the period of 2005-2012, Turkey has ranked higher than Russia, Argentina and Greece.2005(among 125 countries)2012(among 142 countries)01020304050607080ITALYINDIAGREECECHINARUSSIAARGENTINABRAZILMEXICOINDONESIATURKEY384547485354 57596971Source: World Economic Forum72Improving International CompetitivenessGlobal Competitiveness Index
  73. 73. 020406080100120ITALYMEXICOARGENTINARUSSIAGREECECHINATURKEYINDONESIAINDIABRAZIL707377 79 8091 93115 116 119020406080100120140MEXICOTURKEYITALYCHINAGREECEARGENTINARUSSIABRAZILINDONESIAINDIA537187911001131201261291322006(among 155 countries)2012(among 183 countries)Source: World Bank 73Creating A Level Playing FieldEase of Doing Business
  74. 74. We are Making ProgressSource: TreasuryNumberofCompanieswithInternationalCapital(Cumulative,inThousands)5,66,78,811,71516,219,322,125,429,4 29,9051015202530352002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Mar74
  75. 75. Foreign Direct Investment InflowsSource: Central Bank of TurkeyBilliondollar14,8109,60204060801001201980-2002 2003-201175
  76. 76. REER AppreciationSource: Central Bank of Turkey7655657585951051151251351989-951991-1951993-1951995-1951997-1951999-1952001-1952003-1952005-1952007-1952009-1952011-195Linear Trend
  77. 77. THANK YOU…77

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