Turkish Arabic Economic Forum

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Turkish Arabic Economic Forum

  1. 1. Turkish-Arab Economic ForumJune 29, 2012Mehmet ŞimşekMinister of Finance1
  2. 2. OutlineREBALANCING ON GOINGTurkey: Short-Term Outlook• Managing a Soft Landing• Fallout from the Euro CrisisTurkey & MENA• Growing LinksWhere to Invest?• Turkey vs. the “Giants”2
  3. 3. Turkey: Short-Term OutlookManaging a Soft Landing3
  4. 4. Very Strong Recovery, butModeratingSource: TURKSTATRealGDP(s.a,,2008Q1=100)9510087111808590951001051101152007-Q1Q2Q3Q42008-Q1Q2Q3Q42009-Q1Q2Q3Q42010-Q1Q2Q3Q42011-Q1Q2Q3Q44
  5. 5. 15.05.9-5.21.9-6-14914H1-11 H2-11Domestic Demand Net ExportsRebalancingContributiontoGrowth,%Source: TURKSTAT5
  6. 6. Composite Leading IndicatorHovering around 100Index7075808590951001051101152007-13579112008-13579112009-13579112010-13579112011-13579112012-135Source: CBRT6
  7. 7. Real Sector ConfidenceSource: Central Bank of TurkeyIndex5060708090100110120130 2007-1592008-1592009-1592010-1592011-1592012-15Remains in the optimistic zone7
  8. 8. 13weekmovingavg.,y-on-y%Credit Growth, Supportive of Economic GrowthSource: Central Bank of Turkey.Note: Credit Growth is adjusted for exhange movements.Jan.Feb.Mar.Apr.May.Jun.Jul.Aug.Sep.Oct.Nov.Dec.23.601020304050602012 2011 2007-2011 Average8
  9. 9. Employment, Supportive of GrowthSource: TURKSTATAdditionalEmploymentsinceend-2007(MnPeople,s.a.)92021222324252008-12009-12010-12011-12012-1
  10. 10. Employment, Supportive of Growth3,9-5-4-3-2-1012345IrelandSpainGreeceIcelandDenmarkEstoniaPortugalJapanSloveniaItalyUnitedStatesFinlandFranceUnitedKingdomSlovakRepublicCzechRepublicNetherlandsNewZealandAustriaCanadaGermanyKoreaBelgiumNorwaySwitzerlandSwedenAustraliaIsraelSingaporeTurkeyAnnualAverageEmploymentGrowth(%,2007-2011)Source: WEO, TURKSTAT 10
  11. 11. UnemploymentRate,s.a.(December2007=100)80901001101201301401502007-122008-122009-122010-122011-12Source: Eurostat, TURKSTATEuro AreaTurkeyEU 27Unemployment at Decade Low11
  12. 12. Current Account Deficit12
  13. 13. Current Account Deficit12MonthRolling,USDbnSource: Central Bank of TurkeyLarge but Narrowing13-100-80-60-40-200202003-147102004-147102005-147102006-147102007-147102008-147102009-147102010-147102011-147102012-1Current AccountCurrent Account + Net FDI + Net Errors andOmissionsNon Energy Current Account
  14. 14. Improving FinancingSource: CBRT12MonthRolling,USDbn-1001020304050607080902007-13579112008-13579112009-13579112010-13579112011-13579112012-13FDI and Long-Term Portfolio and Short-Term Current Account Deficit14
  15. 15. Tighter Credit Conditions Supportive of AdjustmentCurrent AccountDeficit /GDP∆ Credit Stock / GDP (Right axis)%,12monthcumulativeSource: Central Bank of Turkey15
  16. 16. REER still Supportive of AdjustmentSource: Central Bank of TurkeyCPI-DevelopingCountries-BasedREER(2003=100)8590951001051101151201252003-147102004-147102005-147102006-147102007-147102008-147102009-147102010-147102011-147102012-1416
  17. 17. Medium-to Long-Term RemediesEducationInfrastructureNew & Renewable EnergyR&D and InnovationIncentives to Increase Domestic SavingsNew Investment Incentive Scheme17
  18. 18. Fallout from the Euro Crisis18
  19. 19. Channels of ImpactFinanceConfidenceTrade19
  20. 20. The CNN Effect: Continuous Crisis CoverageCrisis Default Collapse ofEuro20
  21. 21. Impact of Deleveraging21
  22. 22. International Bank Claims on Turkey051015202530All BIS Reporting Countries European developed countries USQ4-11,bn$Source: BIS, Consolidated - Immediate Borrower Basis22
  23. 23. Origins of Large EU Bank Claims on TurkeyQ4-11,bn$Source: BIS, Consolidated - Immediate Borrower Basis012345678UK Netherlands France23
  24. 24. What about claims of Troubled Countries?Q4-11,mn$Source: BIS, Consolidated - Immediate Borrower Basis020406080100120Spain Ireland Greece Italy Portugal24
  25. 25. Impact of Slower Growth25
  26. 26. Europe56.6%Other43.4%2002Exports by DestinationEurope41%Other59%Jan-Apr 2012Source: TURKSTAT26
  27. 27. Source: TURKSTATMENA: life saver?12.126.6101214161820222426282002 2012-Q1ExportstoMENA(%ofTotal)27
  28. 28. MENA: life saver?(2007=100)Source: TURKSTAT2870901101301501701902102302007-13579112008-13579112009-13579112010-13579112011-13579112012-13Export to EU Export to MENA
  29. 29. Turkey & MENA: Growing Links29
  30. 30. Arab SpringShort-Term• Uncertainty• DisruptionLong-Term• Democracy• Prosperity• Stability30
  31. 31. 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: $3,75331Source: IMF, 2011
  32. 32. MENA: TradeTotal Exports of MENA: $1,388 bnOf which Oil: $897 bnTotal Imports of MENA: $844 bn32Source: WTO, 2011
  33. 33. MENA & Turkey: Regional TradeTurkeyTurkey’s Total Exports to MENA: $32 bn3.8 % of MENA importsRegional Trade: Growing, but should be much larger!33Source: TURKSTAT, 2011Turkey’s Total Imports from MENA: $23 bn1.6 % of MENA exports
  34. 34. MENA: Investments2002-10 MENA FDI Flows:Inflows: $546.1 bnOutflows: $222.1 bn34Source: UNCTAD, 2002-10
  35. 35. MENA & Turkey: Regional InvestmentsInvestments: Growing, but could be much largerTurkey35Source: CBRT, 2002-102002-10 Turkey FDI Flows:Inflows: $14.1 bnOutflows: $3.9 bn
  36. 36. Source: SWF Institute; SWF annual reports; McKinsey Global Institute(2011,$tn)MENA: Sovereign Wealth Fund Assets0,00,10,20,30,40,50,60,70,80,9UAE Saudi Arabia Kuwait Qatar Other36
  37. 37. 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: $60/barrel37
  38. 38. Where would you put your money?38
  39. 39. 1.6 1.61.50.80,3 0,30,1 0,100,20,40,60,811,21,41,61,8UK US Germany Japan10 Yr Bond Yield (%)2 Yr Bond Yield (%)Source: BloombergTo Low Yielding Government Bonds?
  40. 40. Money for Nothing?40
  41. 41. 8001.1001.4001.7002.0002.3002.6002.90026.12.200726.02.200826.04.200826.06.200826.08.200826.10.200826.12.200826.02.200926.04.200926.06.200926.08.200926.10.200926.12.200926.02.201026.04.201026.06.201026.08.201026.10.201026.12.201026.02.201126.04.201126.06.201126.08.201126.10.201126.12.201126.02.201226.04.2012Fed Balance Sheet Expansion ($ bn)Source: Bloomberg
  42. 42. 1.2001.5001.8002.1002.4002.7003.00026.12.200726.02.200826.04.200826.06.200826.08.200826.10.200826.12.200826.02.200926.04.200926.06.200926.08.200926.10.200926.12.200926.02.201026.04.201026.06.201026.08.201026.10.201026.12.201026.02.201126.04.201126.06.201126.08.201126.10.201126.12.201126.02.201226.04.2012Source: BloombergECB Balance Sheet Expansion (€ bn)
  43. 43. 80110140170200230260290320350 26.12.200726.02.200826.04.200826.06.200826.08.200826.10.200826.12.200826.02.200926.04.200926.06.200926.08.200926.10.200926.12.200926.02.201026.04.201026.06.201026.08.201026.10.201026.12.201026.02.201126.04.201126.06.201126.08.201126.10.201126.12.201126.02.201226.04.2012BOE Balance Sheet Expansion ( £ bn)Source: Bloomberg
  44. 44. 100110120130140150 31.12.200729.02.200830.04.200830.06.200831.08.200831.10.200831.12.200828.02.200930.04.200930.06.200931.08.200931.10.200931.12.200928.02.201030.04.201030.06.201031.08.201031.10.201031.12.201028.02.201130.04.201130.06.201131.08.201131.10.201131.12.201129.02.201230.04.2012BOJ Balance Sheet Expansion (¥ tn)Source: Bloomberg
  45. 45. What about Turkey?45
  46. 46. CBRT is not printing money ( bn)Source: CBRT02468101214161828.12.200728.02.200828.04.200828.06.200828.08.200828.10.200828.12.200828.02.200930.04.200930.06.200931.08.200931.10.200931.12.200928.02.201030.04.201030.06.201031.08.201031.10.201031.12.201028.02.201130.04.201130.06.201131.08.201131.10.201131.12.201129.02.201230.04.2012
  47. 47. Debt Overhang74.567.2 66.439.9103 102.988.139.430405060708090100OECD US Euro Area Turkey2007 2011Source: OECD, IMF WEO and TreasuryDebt-to-GDP,%47
  48. 48. Turkey: Low DebtSource: TreasurySatisfying Maastricht Criteria since 200477.939.432.020304050607080200120022003200420052006200720082009201020112012*2013*2014*Debt-to-GDP,%48
  49. 49. Turkey: Strong Households96917119020406080100120England US Euro Area TurkeyHouseholdLiabilities,%ofGDP201149Source: CBRT, ECB, Bloomberg
  50. 50. Turkey: Healthy Banks5101520252006-12007-12008-12009-12010-12011-12012-1Target Rate 12%CapitalAdequacyRatio,%Legal Rate 8%Source: BRSA50
  51. 51. Market is pricing in Higher Rating for Turkey510100200300400500600700800900Portugal(WD)Ireland(BBB+)Spain(BBB)Hungary(BB+)Italy(A-)Crotia(BBB-)Romania(BBB-)Slovenia(A)Bulgaria(BBB-)Latvia(BBB-)Lithuania(BBB)Belgium(AA)Slovakia(A+)Turkey(BB+)Poland(A-)France(AAA)Malta(A+)Austria(AAA)CzechRep.(A+)Denmark(AAA)Netherlands(AAA)Estonia(A+)Germany(AAA)Finland(AAA)UK(AAA)Sweden(AAA)ComparativeCDSLevels(5years,bps)*Only 45 bps higher than France!Source: Bloomberg(*) As of June 18, 2012
  52. 52. Why Invest in Turkey?52
  53. 53. Source: TURKSTAT2002 GDP,$ 230 bn2011 GDP,$ 772 bn53
  54. 54. Source: IMF, TURKSTAT, Ministry of Development0123456Japan EU (27) USA TurkeyA Faster Growing EconomyAverageGrowthRate(2002-11%)54
  55. 55. Turkey$772 BnBulgaria$53 bnGreece$303 BnSyria$64 BnIraq$115 BnIran$482 BnArmenia$10 BnGeorgia$14 BnAlgeria$183 BnLibya$36 BnEgypt$232 BnTunisia$46 Bn55
  56. 56. Putting Our House in OrderCombattingcorruptionCreating a levelplaying fieldImprovinginternationalcompetitiveness56
  57. 57. Combatting CorruptionCorruption Perceptions Index2002(among 102 countries)0102030405060708090100ITALYGREECEBRAZILMEXICOCHINATURKEYARGENTINAIDNIARUSSIAINDONESIA3144 455859 657073 7496Source: Transperancy Intenational57
  58. 58. Combatting CorruptionCorruption Perceptions Index020406080100120140160TURKEYCROATIASLOVAKIAITALYBRAZILCHINAROMANIAGREECEINDIAARGENTINAINDONESIAMEXICORUSSIAUKRAINE6166 66 697375 758095100 1001001431522011(among 183 countries)Source: Transperancy Intenational58
  59. 59. Within the period of 2005-2012, Turkey has ranked higher than Russia, Argentina and Greece.2005(among 125 countries)01020304050607080ITALYINDIAGREECECHINARUSSIAARGENTINABRASILMEXICOINDONESIATURKEY384547485354 57596971Source: World Economic ForumImproving International CompetitivenessGlobal Competitiveness Index59
  60. 60. 0102030405060708090CHINAITALYINDONESIABRASILINDIAMEXICOTURKEYRUSSIASLOVAKREPUBLICCROTIAROMANIAUKRAINEARGENTINAGREECE2643465356 585966 6976 77828590Within the period of 2005-2012, Turkey has ranked higher than Russia, Argentina and Greece.2012(among 142 countries)Source: World Economic ForumImproving International CompetitivenessGlobal Competitiveness Index60
  61. 61. 020406080100120ITALYMEXICOARGENTINARUSSIAGREECECHINATURKEYINDONESIAINDIABRAZIL707377 79 8091 93115 116 1192006(among 155 countries)Source: World BankCreating A Level Playing FieldEase of Doing Business61
  62. 62. 020406080100120140160MEXICOTURKEYROMANIACROATIAITALYCHINAGREECEARGENTINARUSSIABRASILINDONESIAINDIAUKRAINE5371 728087911001131201261291321522012(among 183 countries)Source: World BankCreating A Level Playing FieldEase of Doing Business62
  63. 63. Strong Long-Term Prospects63
  64. 64. 2011Population: 75 mnNational income: $772 bn2050 (projections)Population: 100 mnNational Income: $5.2 tnTowards 2050…64
  65. 65. Ambitious TargetsSource: IMF, PricewaterhouseCoopers1. USA2. China3. India4. Japan5. Germany6. Russia8. UK7. Brazil9. France10. Italy11. Mexico12. South Korea13. Spain14. Canada15. Indonesia16. Turkey17. Iran18. Australia19. Taiwan20. Poland20112050TurkeyItalySpainCanadaSouthKorea65
  66. 66. REER AppreciationSource: Central Bank of Turkey6655657585951051151251351989-951991-1951993-1951995-1951997-1951999-1952001-1952003-1952005-1952007-1952009-1952011-195Linear Trend
  67. 67. We are Making ProgressSource: TreasuryNumberofCompanieswithInternationalCapital(Cumulative,inThousands)5.66.78.811.715.016.219.322.125.429.4 29.9051015202530352002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Mar67
  68. 68. Foreign Direct Investment InflowsSource: Central Bank of TurkeyBilliondollar14.8109.60204060801001201980-2002 2003-1168
  69. 69. Invest in TurkeyInvest in Future, Invest in Turkey69
  70. 70. THANK YOU…70

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