The document discusses Turkey's economic situation in the wake of a severe crisis, highlighting a sharp decline in domestic demand and investments despite a stimulus package that provided some relief. Although there are early signs of recovery, including exports and employment prospects, concerns remain about rising fiscal deficits and public health costs. The document also touches on political issues and Turkey's strategic direction in terms of regional challenges and EU membership.

1. WEBinar Nov. 25, 2009 Rolf Danielsen Turkey – weathering the crisis

2. Crisis hit Turkey hard Years of strong growth cut short by crisis Domestic demand fell over a cliff Expectation shock Consumption down 10% (Q1) Investments down 27%

3. But the fall was cushioned Domestic stimulus package Reduced taxes, increased soc. sec. Subsidies for new car purchases etc. wage raise in public sector Lower interest rates Softer exchange rate

4. Signs of recovery Leading indicator: Exports prospects New orders Employment situation

5. But not yet buoyant Fiscal stimulus to expire General import softness Balance of payments Profit tax on T-bills! Rising oil price Higher interest rates Higher fiscal deficit

6. Risk: Government budget deficit sharply up -09 MEP in Sept. 2009 based on robust recovery forecast interest sensitive explosive public health costs

7. Upside: stronger banks Weathered the crisis better than expected No major bank-run: continued deposits growth Credit expansion paused but picking up recently Bad loans rising but still below 6% Less crisis prone

8. Political issues Traditionally high event risk Battle between secularists and traditionalists EU membership Regional opportunities/challenges Kurds Iraq/Iran Armenia Nabucco and gas hub Where is Turkey heading – East or West?