1 Turkey : Struck by the Global Crisis, on Her Way to Recovery, and Still Transforming December 11, 2009

1

Turkey : Struck by the Global Crisis, on Her Way to Recovery, and Still

Transforming

December 11, 2009

2

Some Food for Thought

• What are the basic problems the world system seems to be facing at the moment?

• Are global imbalances here to stay or will they be eliminated surely but slowly or even better quite fast?

• What will the engine of growth for the world economy or are there none in sight at the moment?

• How likely is decoupling in the near future?• How is an important and sizeable emerging market like Turkey

affected in this crisis and are there any stories that come from hers?

• Are there any paradigmatic shifts in the way analysts may be thinking about growth dynamics in emerging markets?

• What does the fiscal picture look like for developed and emerging market economies going forward ?

3

GDP Growth

Source: TURKSTAT

-3.4%

6.8%

-5.7%

6.2%5.3%

9.4%8.4%

6.9%

4.7%

0.9%

-9%

-6%

-3%

0%

3%

6%

9%

12%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

4

GDP Growth

Source: TURKSTAT

GDP Growth

5.9%

9.7%

6.3%5.7%8.1%

3.8%3.2%4.2%

7.2%

2.8%1.0%

-6.5%-7.9%

-3.3%

-14.7%-16%

-13%

-10%

-7%

-4%

-1%

2%

5%

8%

11%

2006

Q1

2006

Q2

2006

Q3

2006

Q4

2007

Q1

2007

Q2

2007

Q3

2007

Q4

2008

Q1

2008

Q2

2008

Q3

2008

Q4

2009

Q1

2009

Q2

2009

Q3

5

-10

-5

0

5

10

15

2004

Q1

2004

Q2

2004

Q3

2004

Q4

2005

Q1

2005

Q2

2005

Q3

2005

Q4

2006

Q1

2006

Q2

2006

Q3

2006

Q4

2007

Q1

2007

Q2

2007

Q3

2007

Q4

2008

Q1

2008

Q2

2008

Q3

2008

Q4

2009

Q1

2009

Q2

2009

Q3

Private Consumption Private Investment

-1

-1

0

1

1

2

2

3

2004

Q1

2004

Q2

2004

Q3

2004

Q4

2005

Q1

2005

Q2

2005

Q3

2005

Q4

2006

Q1

2006

Q2

2006

Q3

2006

Q4

2007

Q1

2007

Q2

2007

Q3

2007

Q4

2008

Q1

2008

Q2

2008

Q3

2008

Q4

2009

Q1

2009

Q2

2009

Q3

Public Consumption Public Investment

Public and Private Sectors’ Contributions to Growth

Source: TURKSTAT

6

Net Exports’ Contribution to Growth

Source: TURKSTAT

-12

-10

-8

-6

-4

-2

0

2

4

6

8

10

2004

Q1

2004

Q2

2004

Q3

2004

Q4

2005

Q1

2005

Q2

2005

Q3

2005

Q4

2006

Q1

2006

Q2

2006

Q3

2006

Q4

2007

Q1

2007

Q2

2007

Q3

2007

Q4

2008

Q1

2008

Q2

2008

Q3

2008

Q4

2009

Q1

2009

Q2

2009

Q3

Exports Imports Net Exports

7

Contributions to Growth

Source: TURKSTAT


-25

-20

-15

-10

-5

0

5

10

2007Q2 2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3

Private Consumption Public Consumption Public Investment

Private Investment Change in Stocks Net Exports

8

Sectors’ Contributions

Source: TURKSTAT


-15

-10

-5

0

5

10

2007

Q1

2007

Q2

2007

Q3

2007

Q4

2008

Q1

2008

Q2

2008

Q3

2008

Q4

2009

Q1

2009

Q2

2009

Q3

Agriculture Industry Services

9


Source: TURKSTAT


-8

-6

-4

-2

0

2

4

6

8

2007Q1 2007Q2 2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3

Construction Trade Transportation Financial Intermediation Services Other Services

10

Private Fixed Capital Investments

Source: TURKSTAT

Mil. TL Mil $ Growth (Real)2002 43,391 28,563 16.9%2003 62,005 41,842 23.6%2004 97,378 68,291 36.1%2005 115,064 85,593 16.2%2006 143,299 99,817 15.0%2007 155,442 119,808 5.3%2008 152,229 118,927 -10.0%

2009 H1 63,228 39,243 -31.6%

16.9%

23.6%

36.1%

16.2% 15.0%

5.3%

-10.0%

-31.6%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

2002 2003 2004 2005 2006 2007 2008 2009 H1

11

Growth Forecasts

Source: YK Economic Research

Medium Term Real GDP Growth Forecast

-20

-15

-10

-5

0

5

10

15

Annual forecastsQuarterly forecasts.

%

2003 2004 2005 2006 2007 2008 2009 2010 2011

-5.2%

3.2% 4.5%

12

Industrial Production (YoY Growth)

Source: TURKSTAT, YK Economic Research

3.7%

-7.9%

0.4%

2.4%

-13.3%

3.2%

7.0%

2.6%

11.7%

8.5%

-3.5%

-4.3%

-6.7%

-20.8%

-18.5%

-17.3%-17.8%

-23.8%-21.3%

-10.3%

-9.0%

-6.3%

-8.6%

6.5%

1.9%

2.4%

-17.8%

-3.7%2.8%

7.3%

3.7%

5.7%

5.1%5.1% -0.7%

-7.2%

-19.0%

-21.4%

-18.5%

-14.7%

-23.1%

-12.9%

-9.0%-6.3%

-5.7%

3.2%

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

2008

M01

2008

M02

2008

M03

2008

M04

2008

M05

2008

M06

2008

M07

2008

M08

2008

M09

2008

M10

2008

M11

2008

M12

2009

M01

2009

M02

2009

M03

2009

M04

2009

M05

2009

M06

2009

M07

2009

M08

2009

M09

2009

M10

2009

M11

IPI Eff. Days-Adjusted IPI

13

Industrial Production : MoM Growth ( Seasonally and Effective Days Adjusted Series )


0.60%

-1.28%

-4.97%

1.67%

-12.77%

2.39%

-1.53%

4.89%

2.88%1.42%

-4.09%

0.31%

9.08%

-0.01%

3.78%

-2.73%

-0.27%-1.73%-2.34%

-16%

-12%

-8%

-4%

0%

4%

8%

12%

2008

M05

2008

M06

2008

M07

2008

M08

2008

M09

2008

M10

2008

M11

2008

M12

2009

M01

2009

M02

2009

M03

2009

M04

2009

M05

2009

M06

2009

M07

2009

M08

2009

M09

2009

M10

2009

M11

Effective Days Adjusted and SA IPI MoM

14

Industrial Production : Sector Growth Rates


Sectors' YoY Growth Rates

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

15

Industrial Production :September / Contributions


Contributions

-25.0

-20.0

-15.0

-10.0

-5.0

0.0

5.0

10.0

Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09

Food&Bev. Textiles Wearing App. Chemicals

Basic Metal Machinery&Eq. Motor Vehicles Other Man. Industry

16

Impact Assessment at the Subsector Level

Production Loss (in terms of one month's output

multiple) Months in Crisis

Average Production Loss

per MonthSlope of LR Trend

before the Hit Slope of Recovery

Gap ( Potential vs.

Current)Adjusted Recovery

Slope First HitBegining of the

Recovery

Total Industry 2.98 17 17.5% 0.0306 0.0931 0.843 0.0785 Jun-08 Apr-09

Mining and Quarrying 1.73 16 10.8% 0.0425 0.0909 0.927 0.0843 Jul-08 Mar-09Coal Mi. and Ext. of Peat 1.85 16 11.6% 0.0771 0 0.852 0.0000 Jul-08 N/ACrude Pet. and Nat. Gas 0.13 3 4.4% 0.1125 0 0.977 0.0000 Dec-08 Jan-09Metalic Ore Mining 2.19 12 18.3% 0.1609 0.419 0.993 0.4160 Nov-08 Mar-09

Other Mining 2.04 12 17.0% 0.0127 0.2846 0.982 0.2794 Nov-08 Jun-09Manufacturing Industry 3.10 17 18.2% 0.0261 0.1023 0.851 0.0871 Jun-08 Apr-09Food&Bev. 0.57 11 5.2% 0.0141 0 1.026 0.0000 Dec-08 Oct-09Tobacco 0.87 8 10.9% 0.0137 0.058 0.924 0.0536 Mar-09 Jun-09

Textiles 1.26 11 11.4% -0.0210 0.0822 1.024 0.0842 Dec-08 Mar-09Wearing App. 2.29 17 13.5% -0.0056 0.0148 0.905 0.0134 Jul-08 Apr-09Leather 1.21 12 10.1% -0.0104 0.0767 0.970 0.0744 Nov-08 Jan-09Wood 1.84 15 12.3% 0.0829 0.1658 0.956 0.1585 Jul-08 Mar-09

Paper 1.71 16 10.7% 0.0305 0.06 0.917 0.0550 Jul-08 Mar-09Publishing 1.70 16 10.6% 0.0206 0.0315 0.886 0.0279 Jul-08 Jan-09Ref. Petroleum 3.51 13 27.0% 0.0061 0.0303 0.712 0.0216 Jul-08 Apr-09Chemicals 2.74 20 13.7% 0.0453 0.1312 0.891 0.1169 Mar-08 Jan-09

Plastics 3.13 17 18.4% 0.0289 0.1552 0.888 0.1379 Jun-08 Mar-09Non-Metalic 2.82 17 16.6% 0.0182 0.0583 0.914 0.0533 Jun-08 Apr-09Basic Metal 4.04 16 25.2% 0.0459 0.0622 0.753 0.0468 Jul-08 Jan-09Metal 4.88 18 27.1% 0.0385 0.1192 0.737 0.0878 May-08 May-09

Machinery&Eq. 2.94 16 18.4% 0.0201 0.1967 0.908 0.1785 Jul-08 Apr-09Electrical Mach. 3.80 15 25.3% 0.0590 0.2826 0.877 0.2477 Aug-08 Apr-09Radio, TV 0.70 7 10.1% -0.0056 0 1.431 0.0000 Sep-08 Feb-09Medical&Opt. Ins. 3.94 16 24.6% 0.0831 0.0855 0.805 0.0688 Jul-08 Mar-09

Motor Vehicles 6.91 18 38.4% 0.2619 0.2483 0.586 0.1455 May-08 Mar-09Other Trans. Eq. 3.72 10 37.2% 0.1481 0.2919 0.598 0.1747 Jan-09 Aug-09Furniture 3.60 19 18.9% 0.0791 0.1799 0.782 0.1406 Apr-08 Mar-09El., Gas and Wat 1.40 14 10.0% 0.0360 0.0396 0.899 0.0356 Sep-08 May-09

17


0

1

2

3

4

5

6

7

8

Total I

ndust

ry

Min

ing a

nd Q

uarry

ing

Coal M

i. an

d Ext

. of P

eat

Crude

Pet. a

nd Nat

. Gas

Met

alic

Ore

Min

ing

Oth

er M

inin

g

Man

ufact

uring In

dustry

Food&Bev

.

Tobacco

Textil

es

Wear

ing

App.

Leath

er

Wood

Paper

Publishin

g

Ref. P

etro

leum

Chemic

als

Plast

ics

Non-M

etal

ic

Basic

Met

al

Met

al

Mac

hiner

y&Eq.

Elect

rical

Mac

h.

Radio

, TV

Med

ical

&Opt.

Ins.

Moto

r Veh

icle

s

Oth

er T

rans

. Eq.

Furnitu

re

El., G

as a

nd W

at0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

Production Loss (in terms of one month's output multiple)

Average Production Loss per Month

18


Slope of LR Trend before the Hit

-0.05

0.00

0.05

0.10

0.15

0.20

0.25

0.30

Total I

ndust

ry

Min

ing a

nd Q

uarry

ing

Coal M

i. an

d Ext

. of P

eat

Crude

Pet. a

nd Nat

. Gas

Met

alic

Ore

Min

ing

Oth

er M

inin

g

Man

ufact

uring In

dustry

Food&Bev

.

Tobacco

Textil

es

Wear

ing

App.

Leath

er

Wood

Paper

Publishin

g

Ref. P

etro

leum

Chemic

als

Plast

ics

Non-M

etal

ic

Basic

Met

al

Met

al

Mac

hiner

y&Eq.

Elect

rical

Mac

h.

Radio

, TV

Med

ical

&Opt.

Ins.

Moto

r Veh

icle

s

Oth

er T

rans

. Eq.

Furnitu

re

El., G

as a

nd W

at

19


Gap ( Potential vs. Current)

0.50

0.55

0.60

0.65

0.70

0.75

0.80

0.85

0.90

0.95

1.00

Total I

ndust

ry

Min

ing a

nd Q

uarry

ing

Coal M

i. an

d Ext

. of P

eat

Crude

Pet. a

nd Nat

. Gas

Met

alic

Ore

Min

ing

Oth

er M

inin

g

Man

ufact

uring In

dustry

Food&Bev

.

Tobacco

Textil

es

Wear

ing

App.

Leath

er

Wood

Paper

Publishin

g

Ref. P

etro

leum

Chemic

als

Plast

ics

Non-M

etal

ic

Basic

Met

al

Met

al

Mac

hiner

y&Eq.

Elect

rical

Mac

h.

Radio

, TV

Med

ical

&Opt.

Ins.

Moto

r Veh

icle

s

Oth

er T

rans

. Eq.

Furnitu

re

El., G

as a

nd W

at

Adjusted Recovery Slope

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.45

Total I

ndust

ry

Min

ing a

nd Q

uarry

ing

Coal M

i. an

d Ext

. of P

eat

Crude

Pet. a

nd Nat

. Gas

Met

alic

Ore

Min

ing

Oth

er M

inin

g

Man

ufact

uring In

dustry

Food&Bev

.

Tobacco

Textil

es

Wear

ing

App.

Leath

er

Wood

Paper

Publishin

g

Ref. P

etro

leum

Chemic

als

Plast

ics

Non-M

etal

ic

Basic

Met

al

Met

al

Mac

hiner

y&Eq.

Elect

rical

Mac

h.

Radio

, TV

Med

ical

&Opt.

Ins.

Moto

r Veh

icle

s

Oth

er T

rans

. Eq.

Furnitu

re

El., G

as a

nd W

at

20

Capacity Utilization

60

65

70

75

80

85

90

Jan-

06

Mar

-06

May

-06

Jul-0

6

Sep-0

6

Nov-06

Jan-

07

Mar

-07

May

-07

Jul-0

7

Sep-0

7

Nov-07

Jan-

08

Mar

-08

May

-08

Jul-0

8

Sep-0

8

Nov-08

Jan-

09

Mar

-09

May

-09

Jul-0

9

Sep-0

9

Nov-09

Capacity Utilization Capacity Utilization_Sa

21

Sources of Capacity Underutilization

0%

10%

20%

30%

40%

50%

60%

2007

/1

2007

/3

2007

/5

2007

/7

2007

/9

2007

/11

2008

/1

2008

/3

2008

/5

2008

/7

2008

/9

2008

/11

2009

/1

2009

/3

2009

/5

2009

/7

2009

/9

Shortage of Demand in Domestic Market Shortage of Demand in Foreign Market Financial Problems

22

Non-Farm Unemployment Rate (%)

Source: TURKSTAT

% 16.4

10

12

14

16

18

20

Mar

-06

May

-06

Jul-0

6

Sep-0

6

Nov-0

6

Jan-

07

Mar

-07

May

-07

Jul-0

7

Sep-0

7

Nov-0

7

Jan-

08

Mar

-08

May

-08

Jul-0

8

Sep-0

8

Nov-0

8

Jan-

09

Mar

-09

May

-09

%

23

Thresholds for TRY/USD Exchange Rate

THRESHOLDS FOR TRY/USD EXCHANGE RATE*

1.0

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

2003 2004 2005 20072006

* Thresholds correspond to unobserved switching Markov regimes estimated by Yapı Kredi Economic Research.

2008 2009

High level regime --» Mean:1.52, Std. Deviation: 0.09

Low level regime --» Mean:1.31, Std. Deviation: 0.07

Source: YK Economic Research

24

Inflation


Monthly Inflation

1.27%

0.64%

-1%

0%

1%

2%

3%

Apr-08 Jun-08 Aug-08 Oct-08 Dec-08 Feb-09 Apr-09 Jun-09 Aug-09 Oct-09

Monthly inf lation Monthly SA

YoY Inflation

5.53%

2%

4%

6%

8%

10%

12%

Apr-08 J un-08 Aug-08 Oct-08 Dec-08 Feb-09 Apr-09 J un-09 Aug-09 Oct-09

25

Contributions to Monthly Inflation


-0.20

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1

Miscellaneous

Hotels and Restaurants

Education

Culture

Communication

Transportation

Health

Houseware

Housing

Clothing and Shoes

Tobacco and Liquor

Food and Beverages

26

Contributions to Yearly Inflation


-1

0

1

2

3

4

5

6

7

1

Miscellaneous

Hotels and Restaurants

Education

Culture

Communication

Transportation

Health

Houseware

Housing

Clothing and Shoes

Tobacco and Liquor

Food and Beverages

27

Inflation

Source: TURKSTAT

PPI CPI Man. Industry2006 11.6% 9.7% 12.3%2007 5.9% 8.4% 4.3%2008 8.1% 10.1% 6.4%

Sep-09 0.6% 0.4% 0.6%Oct-09 0.3% 2.4% 0.2%

Nov-09 1.3% 1.3% 1.1%

Dec-08 -3.5% -0.4% -3.8%Jan-09 0.2% 0.3% 0.0%Feb-09 1.2% -0.3% 0.3%

28

Inflation: Goods vs. Services

Source: CBRT

0%

10%

20%

30%

40%

Aug-0

3

Dec-0

3

Apr-0

4

Aug-0

4

Dec-0

4

Apr-0

5

Aug-0

5

Dec-0

5

Apr-0

6

Aug-0

6

Dec-0

6

Apr-0

7

Aug-0

7

Dec-0

7

Apr-0

8

Aug-0

8

Dec-0

8

Apr-0

9

Aug-0

9

Goods Food Services

0%

2%

4%

6%

8%

10%

12%

14%

16%

Aug-0

6

Oct-

06

Dec-0

6

Feb-0

7

Apr-0

7

Jun-

07

Aug-0

7

Oct-

07

Dec-0

7

Feb-0

8

Apr-0

8

Jun-

08

Aug-0

8

Oct-

08

Dec-0

8

Feb-0

9

Apr-0

9

Jun-

09

Aug-0

9

Oct-

09

Goods Food Services

29

Inflation Expectations

Source: CBRT

5.0

6.0

7.0

8.0

9.0

10.0

11.0

12.0

13.0D

ec-0

8

Jan-

09

Feb

-09

Mar

-09

Apr

-09

May

-09

Jun-

09

Jul-0

9

Aug

-09

Sep

-09

Oct

-09

Nov

-09

Dec

-09

12-Month Ahead CPI (%) 24-Month Ahead CPI (%) End-Year CPI (%)

30

Gross External Debt Profile of Turkey

50% 49%47%

42%

35%30% 28%

33% 34%

40%

49%

58%

64%67%

0%

10%

20%

30%

40%

50%

60%

70%

80%

2002 2003 2004 2005 2006 2007 2008

Public Sector CBRT Private Sector

Source: Undersecretariat of Treasury

31

GENERAL GOVERNMENT NOMINAL DEBT STOCK (EU-DEFINITION) / GDP


39.539.4

46.1

52.3

59.2

67.4

73.7

77.6

0

10

20

30

40

50

60

70

80

90

2001 2002 2003 2004 2005 2006 2007 2008

%

32

General government consolidated gross debt as a percentage of GDP

EU (25 countries) 59.3EU (15 countries) 60.4Italy 104.1Greece 94.8Belgium 83.9Euro area 66.3Hungary 65.8Germany 65.1France 63.9Portugal 63.6Austria 59.5Netherlands 45.7Poland 44.9United Kingdom 44.2Turkey 38.8

Legend ( Series: 2007 )

3.5 - 18.2 18.2 - 29.4 29.4 - 40.4 40.4 - 59.5 59.5 - 104.1 N/A Source: EUROSTAT

33

Net Public Debt Stock / GDP

38.8 36.2 37.9 35.7 35.230.0 28.1 26.5

2.01.3

4.0

6.4

13.4

17.2

25.227.6

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

2001 2002 2003 2004 2005 2006 2007 2008

Net Domestic Debt Stock Net External Debt Stock


34

Net Public Debt Stock / GDP


25.6 26.131.2 29.9 31.3 27.6 26.2 25.7

40.735.4

23.9

19.1

10.3

6.43.2 2.9

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

2001 2002 2003 2004 2005 2006 2007 2008

Net TL Debt Stock Net FX Debt Stock

35

Central Administration Budget- 2009 Realizations

Source: General Directorate of Public Accounts, YK Economic Research

Jan. - Oct. 2008

Jan. - Oct. 2009

real change (%)

2008 budget realization

2008 budget realization/ 2008

budget target (%)

2009 budget target

Jan. - Oct 2008 / year-end real.

Jan. - Oct. 2009 / year-end target

Central Administration Revenues 175,768 175,368 -5.0 208,898 102.1 248,758 84.1 70.5 Tax Revenues 140,321 139,164 -5.6 168,087 98.2 202,090 83.5 68.9 Non-Tax Revenues 30,357 30,817 -3.4 34,298 121.6 40,867 88.5 75.4 Other 5,090 5,387 0.7 6,513 126.6 5,146 78.2 104.7Central Administration Expenditures 180,655 218,600 15.2 225,967 101.5 259,156 79.9 84.4 Non-interest expenditures 137,305 168,356 16.7 175,306 105.3 201,656 78.3 83.5 I. Personnel expenditures 41,295 47,412 9.3 48,825 100.3 57,211 84.6 82.9 II. Government premiums to social security 5,030 5,717 8.2 6,402 99.9 7,243 78.6 78.9 III. Purchases of goods and services 16,828 19,836 12.2 23,941 104.5 25,454 70.3 77.9 IV. Current transfers 57,363 77,071 27.9 70,116 101.3 87,956 81.8 87.6 Duty lossesof SEEs 1,474 3,431 121.5 2,041 131.5 3,081 72.2 111.4 Transfers to social security institutions 31,710 48,548 45.7 36,156 95.2 50,501 87.7 96.1 Agricultural transfers 5,503 3,913 -32.3 5,811 107.6 4,951 94.7 79.0 Other transfers 18,676 21,178 7.9 26,108 107.5 29,422 71.5 72.0 V. Capital expenditures 11,151 11,656 -0.5 18,441 156.6 14,839 60.5 78.5 VI. Other expenditures 5,638 6,664 12.5 7,583 99.9 8,953 74.3 74.4 Interest expenditures 43,351 50,244 10.3 50,661 90.5 57,500 85.6 87.4Primary Balance 38,464 7,012 -82.7 33,592 88.4 47,102 114.5 14.9Budget Balance -4,887 -43,232 - -17,069 94.8 -10,398 28.6 415.8

SELECTED ITEMS FROM CENTRAL ADMINISTRATION BUDGET (YTL million)

36

Revenues vs. Non-interest Expenditures (Real)

Source: General Directorate of Public Accounts, YK Economic Research

3-Month MA YoY Growth Rate

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

Apr

-08

May

-08

Jun-

08

Jul-0

8

Aug

-08

Sep

-08

Oct

-08

Nov

-08

Dec

-08

Jan-

09

Feb

-09

Mar

-09

Apr

-09

May

-09

Jun-

09

Jul-0

9

Aug

-09

Sep

-09

Oct

-09

Revenues Non-interest Expenditures

6-Month MA YoY Growth Rate

-20.0%

-10.0%

0.0%

10.0%

20.0%

Apr

-08

May

-08

Jun-

08

Jul-0

8

Aug

-08

Sep

-08

Oct

-08

Nov

-08

Dec

-08

Jan-

09

Feb

-09

Mar

-09

Apr

-09

May

-09

Jun-

09

Jul-0

9

Aug

-09

Sep

-09

Oct

-09

Revenues Non-interest Expenditures

37

External Balance

Source: CBRT, YK Economic Research

12-Month Rolling

-100,000

-50,000

0

50,000

100,000

150,000

200,000

250,000

Sep-0

5

Dec-0

5

Mar

-06

Jun-

06

Sep-0

6

Dec-0

6

Mar

-07

Jun-

07

Sep-0

7

Dec-0

7

Mar

-08

Jun-

08

Sep-0

8

Dec-0

8

Mar

-09

Jun-

09

Sep-0

9

mill

ion

$

Foreign Trade Deficit Exports Imports

YoY Growth

-60%

-40%

-20%

0%

20%

40%

60%

80%

Sep-0

5

Dec-0

5

Mar

-06

Jun-

06

Sep-0

6

Dec-0

6

Mar

-07

Jun-

07

Sep-0

7

Dec-0

7

Mar

-08

Jun-

08

Sep-0

8

Dec-0

8

Mar

-09

Jun-

09

Sep-0

9

Exports Imports

38

Financial Account (6-Month Rolling)

Source: Turkstat, YK Economic Research

-20,000

-10,000

0

10,000

20,000

Nov-0

7

Jan-

08

Mar

-08

May

-08

Jul-0

8

Sep-0

8

Nov-0

8

Jan-

09

Mar

-09

May

-09

Jul-0

9

Sep-0

9

Portfolio Investment Banks Other Sectors

39

Financial Account (6-Month Rolling)

Source: Turkstat, YK Economic Research

-10,000

-5,000

0

5,000

10,000

15,000

20,000

Jul-0

5

Oct-

05

Jan-

06

Apr-0

6Ju

l-06

Oct-

06

Jan-

07

Apr-0

7Ju

l-07

Oct-

07

Jan-

08

Apr-0

8Ju

l-08

Oct-

08

Jan-

09

Apr-0

9Ju

l-09

Oct-

09

Portfolio Investment Banks Other Sectors

40

Primary Surplus (% of GDP)

Source: Undersecretariat of Treasury, YK Economic Research

1.0

4.4

5.2

3.3

4.0

4.9

6.05.4

4.2

3.5

-2.1

-0.8

-0.2

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

90-99 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009f 2010f 2011f

41

Current Account Deficit (12-Month Rolling)

Source: CBRT, TDM, YK Economic Research

-60,000

-50,000

-40,000

-30,000

-20,000

-10,000

0

Nov-07 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09

Current Account Energy Balance

42

Non-Debt Financing of CA Deficit


(60)

(40)

(20)

-

20

40

05-2004 11-2004 05-2005 11-2005 05-2006 11-2006 05-2007 11-2007 05-2008 11-2008 05-20090.0%

25.0%

50.0%

75.0%

100.0%

125.0%

Non-debt Financing (1, left scale) Current Account Deficit (2, left scale) (1)/(2) (right scale)

43

FDI ($ bln)

Source: Undersecretariat of Treasury, YK Economic Research

1.82.8

10.0

20.2

22.1

18.0

8.0

10.0

12.0

0.0

5.0

10.0

15.0

20.0

25.0

2003 2004 2005 2006 2007 2008 2009f 2010f 2011f

44

Bond Rates & O/N

Source: ISE, CBRT

6

10

14

18

22

26

30

23-O

ct-0

7

27-N

ov-0

7

3-Ja

n-08

6-F

eb-0

8

11-M

ar-0

8

14-A

pr-0

8

20-M

ay-0

8

23-J

un-0

8

25-J

ul-0

8

28-A

ug-0

8

6-O

ct-0

8

10-N

ov-0

8

18-D

ec-0

8

22-J

an-0

9

25-F

eb-0

9

31-M

ar-0

9

6-M

ay-0

9

10-J

un-0

9

14-J

ul-0

9

17-A

ug-0

9

18-S

ep-0

9

26-O

ct-0

9

2-D

ec-0

9

Secondary Market CBRT O/N

45

Real Interest Rate & Real Exchange Rate

* deflated via CPI

** CPI based, 1995=100

Source: CBRT, TURKSTAT

1.83

171.2

0

5

10

15

20

25

30

35

Oct-02

Mar-03Aug-03

Jan-04Jun-04

Nov-04Apr-0

5Sep-05

Feb-06Jul-06

Dec-06May-07

Oct-07

Mar-08Aug-08

Jan-09Jun-09

100

120

140

160

180

200

Real Interest Rate (left scale) Real Effective Exchange Rate

46

Shares in Bond Stock


Banks

50.0%

55.0%

60.0%

65.0%

Non-Bank Sector

20.0%

24.0%

28.0%

32.0%

Foreign Investors

0.0%

5.0%

10.0%

15.0%

20.0%

Funds

2.5%

4.5%

6.5%

8.5%

10.5%

47

Bond Stocks (Billion TL)


20

25

30

35

40

45

50

5-J an-0723-Mar-07

8-J un-0724-Aug-07

9-Nov-0725-J an-08

11-Apr-0827-J un-08

12-Sep-0828-Nov-08

13-Feb-091-May-09

17-J ul-092-Oct-09

135

145

155

165

175

185

195

205

215

225

235

245

Foreign Investors (right scale) Banks' total bond portfolio (right scale)

48

Consumer Credits (% ch of 8W rolling)


8-Week Rolling

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

1/4/

2008

2/4/

2008

3/4/

2008

4/4/

2008

5/4/

2008

6/4/

2008

7/4/

2008

8/4/

2008

9/4/

2008

10/4

/200

8

11/4

/200

8

12/4

/200

8

1/4/

2009

2/4/

2009

3/4/

2009

4/4/

2009

5/4/

2009

6/4/

2009

7/4/

2009

8/4/

2009

9/4/

2009

10/4

/200

9

11/4

/200

9

12/4

/200

9

Housing Car Loans Other Consumer Credits

49

Commercial Credits (% ch of 8W rolling)


8-Week Rolling

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

1/4/

2008

2/4/

2008

3/4/

2008

4/4/

2008

5/4/

2008

6/4/

2008

7/4/

2008

8/4/

2008

9/4/

2008

10/4

/200

8

11/4

/200

8

12/4

/200

8

1/4/

2009

2/4/

2009

3/4/

2009

4/4/

2009

5/4/

2009

6/4/

2009

7/4/

2009

8/4/

2009

9/4/

2009

10/4

/200

9

11/4

/200

9

12/4

/200

9

Commercial Credits Consumer Credits

50

CBRT Expectations Survey

Source: CBRT

End-Year Exchange Rate (TL/$)

1.499

1

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.8

12/1

5/200

8

1/15

/200

9

2/15

/200

9

3/15

/200

9

4/15

/200

9

5/15

/200

9

6/15

/200

9

7/15

/200

9

8/15

/200

9

9/15

/200

9

10/1

5/200

9

11/1

5/200

9

12/1

5/200

9

51


Source: CBRT

3-Month Ahead 6-Month T-Bill Rate (comp, %)

8.02

0

2

4

6

8

10

12

14

16

18

20

12/1

5/200

8

1/15

/200

9

2/15

/200

9

3/15

/200

9

4/15

/200

9

5/15

/200

9

6/15

/200

9

7/15

/200

9

8/15

/200

9

9/15

/200

9

10/1

5/200

9

11/1

5/200

9

12/1

5/200

9

3-Month Ahead 5-Year Semi-Annually Couponed Gov. Bond Rate (comp, %)

10.2

0

5

10

15

20

25

12/1

5/200

8

1/15

/200

9

2/15

/200

9

3/15

/200

9

4/15

/200

9

5/15

/200

9

6/15

/200

9

7/15

/200

9

8/15

/200

9

9/15

/200

9

10/1

5/200

9

11/1

5/200

9

12/1

5/200

9

52


Source: CBRT

2009 Growth (%)

-5.70

-6

-4

-2

0

2

4

6

12/1

5/200

8

1/15

/200

9

2/15

/200

9

3/15

/200

9

4/15

/200

9

5/15

/200

9

6/15

/200

9

7/15

/200

9

8/15

/200

9

9/15

/200

9

10/1

5/200

9

11/1

5/200

9

12/1

5/200

9

53

Relative Currency Performances31 December 2007= 1.00

Source: Reuters, YK Economic Research

0.700

0.900

1.100

1.300

1.500

1.700

1/1/

08

3/1/

08

5/1/

08

7/1/

08

9/1/

08

11/1

/08

1/1/

09

3/1/

09

5/1/

09

7/1/

09

9/1/

09

11/1

/09

Turkey Brazil Argentina South Africa

0.700

0.900

1.100

1.300

1.500

01/0

1/08

03/0

1/08

05/0

1/08

07/0

1/08

09/0

1/08

11/0

1/08

01/0

1/09

03/0

1/09

05/0

1/09

07/0

1/09

09/0

1/09

11/0

1/09

Turkey Hungary Russia Poland

54

Relative Currency Performances31 December 2008= 1.00


0.700

0.800

0.900

1.000

1.100

1.200

12/3

1/08

1/31

/09

2/28

/09

3/31

/09

4/30

/09

5/31

/09

6/30

/09

7/31

/09

8/31

/09

9/30

/09

10/3

1/09

11/3

0/09

Turkey Brazil Argentina South Africa

0.900

1.000

1.100

1.200

1.300

12/3

1/08

01/3

1/09

02/2

8/09

03/3

1/09

04/3

0/09

05/3

1/09

06/3

0/09

07/3

1/09

08/3

1/09

09/3

0/09

10/3

1/09

11/3

0/09

Turkey Hungary Russia Poland

55

MSCI Indices (31 Dec 2007 =1.0)


-

0.20

0.40

0.60

0.80

1.00

1.20 12

/31/

07

1/31

/08

2/29

/08

3/31

/08

4/30

/08

5/31

/08

6/30

/08

7/31

/08

8/31

/08

9/30

/08

10/3

1/08

11/3

0/08

12/3

1/08

1/31

/09

2/28

/09

3/31

/09

4/30

/09

5/31

/09

6/30

/09

7/31

/09

8/31

/09

9/30

/09

10/3

1/09

Turkey Brazil Hungary Poland Russia South Africa

56

MSCI Indices (31 Dec 2008 =1.0)


0.400

0.600

0.800

1.000

1.200

1.400

1.600

1.800

2.000

2.200

2.40012

/31/

08

1/14

/09

1/28

/09

2/11

/09

2/25

/09

3/11

/09

3/25

/09

4/8/

09

4/22

/09

5/6/

09

5/20

/09

6/3/

09

6/17

/09

7/1/

09

7/15

/09

7/29

/09

8/12

/09

8/26

/09

9/9/

09

9/23

/09

10/7

/09

10/2

1/09

11/4

/09

11/1

8/09

Turkey Brazil Hungary Poland Russia South Africa

57

Turkey vs. Selected Emerging Markets

58


59


60


61


62

Middle Class in the Making

GENERAL

0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0

1st 20%

2nd 20%

3rd 20%

4th 20%

5th 20%

2008

2007

2006

2004

2003

GENERAL

0.2

0.81.0 1.1

-3.1-3.5

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

1st 20% 2nd 20% 3rd 20% 4th 20% 5th 20%


63


FOOD AND NON-ALCOHOLIC BEVERAGES

0.0 5.0 10.0 15.0 20.0 25.0 30.0

1st 20%

2nd 20%

3rd 20%

4th 20%

5th 20%

2008

2007

2006

2004

2003

FOOD AND NON-ALCOHOLIC BEVERAGES

0.4

-0.3

0.2 0.2

-0.4-0.5

-0.4

-0.3

-0.2

-0.1

0.0

0.1

0.2

0.3

0.4

0.5

1st 20% 2nd 20% 3rd 20% 4th 20% 5th 20%

ALCOHOLIC BEVERAGES AND TOBACCO

0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0

1st 20%

2nd 20%

3rd 20%

4th 20%

5th 20%

2008

2007

2006

2004

2003

ALCOHOLIC BEVERAGES AND TOBACCO

0.9

1.61.4

-1.9 -2.0-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

1st 20% 2nd 20% 3rd 20% 4th 20% 5th 20%


64


CLOTHING AND FOOTWEAR

0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 50.0

1st 20%

2nd 20%

3rd 20%

4th 20%

5th 20%

2008

2007

2006

2004

2003

CLOTHING AND FOOTWEAR

1.1

-0.7

1.0

-0.1

-1.3-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

1st 20% 2nd 20% 3rd 20% 4th 20% 5th 20%

HOUSING, WATER, ELECTRICITY, GAS AND OTHER FUELS

0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0

1st 20%

2nd 20%

3rd 20%

4th 20%

5th 20%

2008

2007

2006

2004

2003

HOUSING, WATER, ELECTRICITY, GAS AND OTHER FUELS

0.3

1.4 1.4 1.3

-4.4-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

1st 20% 2nd 20% 3rd 20% 4th 20% 5th 20%


65


FURNISHINGS, HOUSEHOLD EQ., ROUTINE MAINT. OF THE HOUSE

0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 50.0

1st 20%

2nd 20%

3rd 20%

4th 20%

5th 20%

2008

2007

2006

2004

2003

FURNISHINGS, HOUSEHOLD EQ., ROUTINE MAINT. OF THE HOUSE

1.82.5

1.7

0.1

-6.1-7.0

-6.0

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

1st 20% 2nd 20% 3rd 20% 4th 20% 5th 20%

HEALTH

0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 50.0

1st 20%

2nd 20%

3rd 20%

4th 20%

5th 20%

2008

2007

2006

2004

2003

HEALTH

-0.5

0.1

-0.2

3.3

-2.7

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

1st 20% 2nd 20% 3rd 20% 4th 20% 5th 20%


66


TRANSPORT

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0

1st 20%

2nd 20%

3rd 20%

4th 20%

5th 20%

2008

2007

2006

2004

2003

TRANSPORT

1.1

3.1 2.83.6

-10.6-12.0

-10.0

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

1st 20% 2nd 20% 3rd 20% 4th 20% 5th 20%

COMMUNICATIONS

0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 50.0

1st 20%

2nd 20%

3rd 20%

4th 20%

5th 20%

2008

2007

2006

2004

2003

COMMUNICATIONS

1.42.1

2.5

1.0

-7.0-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

1st 20% 2nd 20% 3rd 20% 4th 20% 5th 20%


67


RECREATION AND CULTURE

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0

1st 20%

2nd 20%

3rd 20%

4th 20%

5th 20%

2008

2007

2006

2004

2003

RECREATION AND CULTURE

1.0

3.62.5

5.3

-12.4-14.0

-12.0

-10.0

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

1st 20% 2nd 20% 3rd 20% 4th 20% 5th 20%

EDUCATION

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0

1st 20%

2nd 20%

3rd 20%

4th 20%

5th 20%

2008

2007

2006

2004

2003

EDUCATION

2.0 2.1

5.7

2.7

-12.5-15.0

-10.0

-5.0

0.0

5.0

10.0

1st 20% 2nd 20% 3rd 20% 4th 20% 5th 20%


68


HOTELS, CAFES AND RESTAURANTS

0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 50.0

1st 20%

2nd 20%

3rd 20%

4th 20%

5th 20%

2008

2007

2006

2004

2003

HOTELS, CAFES AND RESTAURANTS

-0.5

1.8

1.2

0.3

-2.8

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

1st 20% 2nd 20% 3rd 20% 4th 20% 5th 20%

MISCELLANEOUS GOODS AND SERVICES

0.0 10.0 20.0 30.0 40.0 50.0 60.0

1st 20%

2nd 20%

3rd 20%

4th 20%

5th 20%

2008

2007

2006

2004

2003

MISCELLANEOUS GOODS AND SERVICES

1.01.4 1.6

0.8

-4.8

-6.0

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

1st 20% 2nd 20% 3rd 20% 4th 20% 5th 20%


69

Quintile Inflation Divergence from the Headline


Divergence from the Headline

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

1.%20 2.%20 3.%20 4.%20 5.%20

2004 2005 2006 2007 2008

Documents

1 Turkey : Struck by the Global Crisis, on Her Way to Recovery, and Still Transforming December 11, 2009