Turkish-Arab Capital Markets ForumSeptember 20, 2013
Mehmet Şimşek Minister of Finance
2
Main Messages
Turkey• A decade of transformation• Strong medium and long-term outlook
Region• Offering vast opportunities• Growing links with Turkey
3
Turkey: A Decade of Transformation
Political Stability
4
Average Lifetime of Governements during 1950-2002 AK Party Governments Since 2002 0
20
40
60
80
100
120
140
15 Months
131 Months
1923-2002
Average Lifetime of
Governments: 17 months
2002-12
Political Stability
2023 Targets
Rapidly Growing Economy
1993-2002 2003-122.5
3
3.5
4
4.5
5
5.5
3.1
5.1
Growth
Source: TURKSTAT5
(%)
Real Convergence with Advanced EconomiesIn
com
e Pe
r Cap
ita (P
PP, %
)
Source: IMF, OECD, TURKSTAT6
2002 201220
25
30
35
40
45
50
55
60
23.4
36.436.9
56.8
Turkey / USA
Turkey /European Union
7
Low Deficit
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.010.8
7.9
4.1
0.1
-1.3
0.2
1.6
5.5
3.0
0.41.0 1.4 1.2 0.9
Maastricht Criteria: 3%
Medium-Term Program (2013-15)
Achieved Maastricht Criteria except 2009
Source: Ministry of Development
Budg
et D
efici
t-to
-GDP
, %
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 201530
35
40
45
50
55
60
65
70
75 74.0
67.7
59.6
52.7
46.5
39.9 40.0
46.1
42.3
39.136.2
35.033.0
31.0
Medium-Term Program (2013-15)
Lower Public DebtDe
bt-to
-GDP
, %
Satisfying Maastricht Criteria since 2004
Maastricht Criteria: 60%
Source: Treasury 8
9
107,2
125,5
99,1
6,2
0
20
40
60
80
100
120
140
1980
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
Declining Inflation Rate (y/y, %)
Source: TURKSTAT
Lowest rate for the past 44 years
2023 target low single-digits
Well-Capitalized Banking SectorCa
pita
l Ade
quac
y Ra
tio, %
Target Rate 12%
Legal Rate 8%
Source: BRSA
Capital adequacy ratio twice the minimum legal limit of 8%.
2003
-1 4 7 1020
04-1 4 7 10
2005
-1 4 7 1020
06-1 4 7 10
2007
-1 4 7 1020
08-1 4 7 10
2009
-1 4 7 1020
10-1 4 7 10
2011
-1 4 7 1020
12-1 4 7 10
2013
-1 4 7
0
5
10
15
20
25
30
35
15.9
10
Low Household Leverage
Source: CBRT, ECB
(Hou
seho
ld L
iabi
lities
, % o
f GDP
, 20
12)
11
DenmarkNetherlands
IrelandUnited Kingdom
PortugalSweden
SpainEuro area
FinlandGreece
MaltaGermany
FranceBelgium
LuxembourgAustria
ItalyEstoniaPolandLatvia
Czech RepublicHungarySloveniaSlovakia
LithuaniaTURKEY
0 20 40 60 80 100 120 140 160
65.5
21.2
Turkish HHs do not have FX exposure
Moderate Corporate Leverage
12
LuxembourgSpain
PortugalNetherlands
IrelandDenmark
ItalySlovenia
AustriaSwedenGreeceFrance
TURKEYLatvia
EstoniaGermany
FinlandAverageBelgium
United KingdomHungary
LithuaniaSlovakia
Czech RepublicPoland
0 20 40 60 80 100 120
39.2
34.1
(Cor
pora
te li
abili
ties,
%, G
DP)
Source: CBRT, Cetinkaya, March 2013, BRSA
13
Turkey: Strong Medium and Long-Term Outlook
GDP
Source: TURKSTAT, Medium-Term Program,PwC
2002
2050
2002$ 230 billion
2050$ 5 trillion
2012$ 786 billion
2023$ 2 trillion
3.5 times
2.5 times
2.5 times
14
GDP per Capita
Source: TURKSTAT, Medium-Term Program,PwC
2002
2050
2002$ 3,492
2012 $10,497
2023 $ 25,000
2050$ 50,000
3.1 times
2.3 times
2 times
15
Ambitious Targets
Source: IMF, PricewaterhouseCoopers
1. USA2. China3. India4. Japan5. Germany6. Russia
8. UK7. Brazil
9. France10. Italy11. Mexico12. South Korea13. Canada14. Spain15. Indonesia16. TURKEY17. Iran18. Australia19. Saudi Arabia20. Taiwan
2012 (GDP-PPP) TargetTop 10
in the World
Top 3 in Europe
6th in Europe
16th in the World
16
17
Determinants of Long-Term Growth
Quality of Institutions
DemographicsProductivity
18
Improving Quality of InstitutionsDoing Business
Corruption Perception Index
Global Competitiveness IndexHuman Development Index
OECD-FDI Regulatory Restrictiveness Index
Past Present
2023
Source: WB, WEF, Transparency International, OECD
19
Priorities & A Strong Reform Agenda
Enhancing Competition
Deepening Capital Markets Education
Improving Labor Market Flexibility
Local & Renewable EnergyInfrastructure
Combatting Shadow Economy
Moving up the Value-Chain
Narrowing Regional
Development Gaps
20
Favorable Demographics
Source: Eurostat
Shar
e of
15-
24 y
ears
old
in To
tal P
op. (
%)
AndorraItaly
GreeceSpain
PortugalGermanySlovenia
IrelandBulgaria
LuxembourgSwitzerland
CroatiaCzech Republic
AustriaLiechtenstein
SerbiaHungary
NetherlandsFinlandFrance
DenmarkUnited Kingdom
NorwaySwedenEstoniaUkraine
MaltaPoland
LatviaSlovakia
MontenegroLithuania
Iceland Macedonia
GeorgiaTurkey
MoldovaAzerbaijan
7 9 11 13 15 17 19 21
16.8
21
Region
Region: Offering Vast Opportunities
Offers vast opportunities
Geography
Demographics
Growth Opportunities
23
Blessed Geography
• Many nations are blessed with significant natural resources
• Majority of the land is arid/ semi-arid
24
MENA: Demographics
Source: IMF, 2012
MENA: 389.3 million people
MENA + Turkey: 464.9 million people
Extremely favorable demographics
Turkey: 50%
Young population is under a fifth of the EU population*
* Source: Eurostat, 2007 census
26
MENA: A Sizeable Market
Yemen $58
Source: IMF, 2012
MENA: $2,954 bn
MENA + Turkey: $3,740 bn
27
With Strong Growth ProspectsM
ENA
GDP
(Cur
rent
Pric
es, $
Tn)
2002 2012 2013 2014 2015 2016 20170.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
0.8
3.03.1
3.23.4
3.63.8
Nea
rly 4
tim
es
Projections
Source: IMF, 2012
28
Supported by Huge Investment Projects
$4.3 trillion construction projects
by 2020.
$250bn power sector in the next 5
Source: 11th Power-Gen Middle East Conference, Mena Economic Forum Feb 2013
But Regional Integration is Limited…
Regional Integration should Grow and the Region Should Prosper
30
MENA Trade: Exports are Sizeable, but…
Total Exports of MENA: $1,491 bn
Total Imports of MENA: $877 bn
Source: WTO, 2012
31
Openness
Total Trade Excluding Oil Excluding Natural Resources
MENA (%, GDP) 47% 12% 8%
WORLD (%, GDP) 22% 19% 18%
Source: Behar, A. and C. Freund, 2011, The Trade Performance of the Middle East and North Africa
32
Growing Links with Turkey
33Source: TURKSTAT
Trade Links are growing b/w Turkey & MENA
2002 July 20138
13
18
23
28
12.1
29.5
Shar
e of
MEN
A in
Tur
kish
Exp
orts
(%)
Turkey’s Total Exports to MENA: $45.4 bn
Turkey’s Total Imports from MENA: $24.9 bn
But Investments are still limited
Investments: Growing, but could be much larger
Turkey
34Source: CBRT
2002-12 Turkey FDI Flows:
Inflows: $8.3bn3.2% of MENA Outflows
Outflows: $1.1 bn0.2% of MENA Inflows
35
Turkey & MENA: Complementary Regions
Turkey: Water rich
Turkey: Hydrocarbon poor
MENA: Hydrocarbon rich
MENA: Scarcity of water
MENA: Large Surpluses Turkey: A Large
External Deficit
36
Growth Opportunities
Tourism
Construction
Agriculture
Transportation
Energy
37
(Mill
ion
peop
le)
2002 20125
10
15
20
25
30
35
13.2
31.8
Tourism
Agriculture Sector in Turkey
Source: World Bank, Ministry of Agriculture
In 2002 $24 billion
11th in the world
In 2011 $62 billion
6th in the world
In 2023 $150 billion
Turkey will be in the first five countries
Construction
Source: Global Construction 2020
Urban RenovationNumber of Residences: $ 6.5 mn
Total Cost: $235.8 bn
40
Investment in Transportation
Over the past 10 years, $75 billion invested in transportation
$350 billion investment required for planned projects by 2023
41
Projects of the Century -I
Marmaray Channel Istanbul
Tube Tunnel 3rd Bridge
42
Projects of the Century - II
Izmit Gulf Transit Istanbul-İzmir Highway High-Speed Train through Ankara-Bursa-Istanbul
43
Huge Investment Needs in Energy
World energy demand is projected to grow by 40 % until 2030. Turkey’s energy demand is projected to grow by 146 % until 2030.
Source: Ministry of Energy and Natural Resources
Turkey ranks 2nd to China in energy demand growth
44
Thank You!