Medium Term Program 2018-2020 September 27 th , 2017 Outline - PowerPoint PPT Presentation

Medium Term Program 2018-2020 September 27 th , 2017

Outline Global Economy Turkish Economy Medium Term Program 2

Global Economy

Recovery in Global Growth 5 4.8 (Avg. Growth, %) 4 3.7 3.3 3 2 2002-07 2008-17 2018-20F F : Forecast 4 Source: IMF World Economic Outlook Report

Source: Bloomberg (Manufacturing) Indicators Point out Revival in Production 48 50 52 54 56 58 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Global PMI Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 Eurozone PMI May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 53.1 57.4 5

World Trade Volume is Picking Up 9 7.7 8 7 6 (Avg. Growth, %) 5 3.9 4 3.1 3 2 1 0 2002-07 2008-17 2018-20F F : Forecast 6 Source: IMF World Economic Outlook Report

Moderate Global Inflation 10 8 (Avg., %) 6 4.4 4 3.4 1.9 2 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017E 2018F World Advanced Economies Emerging Economies E : Estimate F: Forecast 7 Source: IMF World Economic Outlook Report

Emerging Market Capital Flows Turn Positive 600 400 (private, net, billion $) 200 0 -200 -400 -600 -800 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017E 2018F Emerging Markets Emerging Markets (excluding China) E : Estimate F: Forecast 8 Source: IIF

Oil Prices Expected to Grow Slightly 120 112.0 110 97.7 100 90 (Brent, $/barrel) 80 72.7 70 60.0 60 61.9 50 44.0 40 30 25.0 20 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Note: Dashed line represents MTP period. 9 Source: IMF World Economic Outlook, Reuters Futures

Downward Risks to the Global Economy Faster than Expected Monetary Tightening Geopolitical Tensions Protectionism in Global Trade High Indebtedness and Aging Population 10

Turkish Economy

Improved Growth Performance 5.8 5.6 5.6 5.4 5.2 (Avg. Growth, %) 5.0 4.8 4.8 4.7 4.6 4.4 4.2 4.0 1924-2002 1924-2016 2003-16 12 Source: TURKSTAT, Ministry of Development

Rising Income per Capita 12,000 24,636 10,883 25,000 10,000 20,000 (GDP pc, $, PPP) (GDP pc , $) 8,000 15,000 6,000 9,208 10,000 3,581 4,000 5,000 2,000 0 0 2002 2016 2002 2016 13 Source: TURKSTAT

Source: OECD (GDP pc, PPP $, Turkey/EU) 30 40 50 60 70 Real Convergence with Developed 37.1 2002 2003 2004 2005 2006 Countries 2007 2008 2009 2010 2011 2012 2013 2014 2015 62.2 2016 14

Strong Employment Growth 28 27.2 27 26 Employment (million people) 25 24 23 22 21 20.6 20 19 2009 2010 2011 2012 2013 2014 2015 2016 15 Source: TURKSTAT

Current Account Deficit at Manageable Level 2 0 (12 month rolling, % of GDP) -2 -3.8 -4 -6 -8 -8.3 -10 2012-Q1 Q2 Q3 Q4 2013-Q1 Q2 Q3 Q4 2014-Q1 Q2 Q3 Q4 2015-Q1 Q2 Q3 Q4 2016-Q1 Q2 Q3 Q4 Current Account Balance Current Account Balance Exc. Energy & Gold 16 Source : TURKSTAT, CBRT

Significant Progress in Price Stability 80 70.7 70 (Avg., inflation, %, year end) 60 50 40 30 20 9.0 10 0 1989-2002 2003-16 17 Source: TURKSTAT, Ministry of Development

Ensured Fiscal Discipline 12.0 10.5 10.5 General Government Deficit (% of GDP) 9.0 7.5 6.0 4.5 Maastricht Criteria: 3% 3.0 1.3 1.5 0.0 -1.5 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 18 Source: Ministry of Development, TURKSTAT

Relatively Low Fiscal Deficit 5 4.8 General Government Deficit (% of GDP, 2016) 4 3.5 Maastricht Criteria: 3% 3.0 3 2 1.7 1.3 1 0 EMs G7 OECD Euro Area TURKEY 19 Source: IMF, OECD, Ministry of Development, TURKSTAT

Sharp Decline in Public Debt 80 72.1 70 EU Defined Public Debt (% of GDP) Maastricht Criteria: 60% 60 50 40 28.1 30 20 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 20 Source: Undersecretariat of Treasury, TURKSTAT

Favorable Debt Dynamics 140 EU Defined Public Debt (% of GDP, 2016) 120.4 120 113.5 100 91.3 80 Maastricht Criteria: 60% 60 47.3 40 28.1 20 G7 OECD Euro Area EMs TURKEY 21 Source: IMF, OECD, Undersecretariat of Treasury, TURKSTAT

Medium Term Program 2018-2020

Main Objectives of MTP Boosting growth and employment, improving income distribution. Maintaining macroeconomic stability Improving human capital & quality of labor force Expanding high value-added production Improving investment & business climate Enhancing institutional quality of public sector 23

GDP Growth 6 5.5 5.5 5.5 5.5 5 (%) 4 3.2 3 2 2016 2017 E 2018 P 2019 P 2020 P E: Estimate 24 P: Program

GDP per Capita 14,000 13,024 13,000 World Bank high income threshold ($12,235) 12,100 12,000 11,409 ($) 10,883 11,000 10,579 10,000 9,000 8,000 2016 2017 E 2018 P 2019 P 2020 P E: Estimate P: Program 25 Note: World Bank high income threshold is calculated by using Atlas Method.

Unemployment Rate 11.5 10.9 11.0 10.8 10.5 10.5 (%) 9.9 10.0 9.6 9.5 9.0 2016 2017 E 2018 P 2019 P 2020 P E: Estimate 26 P: Program

Inflation Rate 10 9.5 9 8.5 8 (CPI, year end, % ) 7.0 7 6.0 6 5.0 5 4 3 2016 2017 E 2018 P 2019 P 2020 P E: Estimate 27 P: Program

Current Account Deficit 5.0 4.6 4.5 4.3 (% of GDP) 4.1 3.9 4.0 3.8 3.5 3.0 2016 2017 E 2018 P 2019 P 2020 P E: Estimate 28 P: Program

Central Government Budget Deficit 2.5 2.0 1.9 2.0 1.9 (% of GDP) 1.6 1.5 1.1 1.0 0.5 2016 2017 E 2018 P 2019 P 2020 P E: Estimate 29 P: Program

Public Sector Borrowing Requirement 3.0 2.4 2.5 2.1 (% of GDP) 2.0 1.9 1.5 1.3 1.0 1.0 0.5 2016 2017 E 2018 P 2019 P 2020 P E: Estimate 30 P: Program

EU Defined Public Debt 29.0 28.5 28.5 28.5 (% of GDP) 28.1 28.0 28.0 27.5 27.5 27.0 2016 2017 E 2018 P 2019 P 2020 P E: Estimate 31 P: Program

Public Policy Priority Areas to Support Growth and Employment Maintaining macroeconomic stability Improving human capital and quality of labor force Expanding high value-added production Improving business and investment climate Enhancing institutional quality in public sector 32

Maintaining Macroeconomic Stability – I PRICE STABILITY Maintaining monetary policy focused on price stability Continuing the work on eliminating structural causes of inflation rigidity Taking measures to decrease food inflation volatility 33

Maintaining Macroeconomic Stability – II FISCAL SUSTAINABILITY Increasing efficiency in public expenditures Raising productivity in public investments Increasing the quality of public revenues Utilizing inefficient or idle public assets Strengthening the institutional structure of public financial management 34

Maintaining Macroeconomic Stability – III MAINTAINING FINANCIAL STABILITY and INCREASING DOMESTIC SAVINGS Limiting systemic risks Deepening the financial system and increasing domestic savings Developing interest-free financial system 35

Maintaining Macroeconomic Stability – IV SUSTANABILITY in CURRENT ACCOUNT BALANCE Increasing exports Reducing energy-import dependency Improving financial conditions Improving the efficiency in logistics services 36

Boosting Human Capital and the Quality of Labor Force – I IMPROVING the QUALITY of EDUCATION Improving equality of opportunities in education Improving the quality of teacher training process Strengthening vocational and technical training Developing specialization in universities Improving the effectiveness of governance in the education system 37

Boosting Human Capital and the Quality of Labor Force – II INCREASING the EFFICIENCY of LABOR MARKET Improving the adaptation of labor force to digital transformation and technological change Improving the match between skills needed for job market and the labor force Increasing the employment of vulnerable groups Reducing informal employment 38

Expanding High Value Added Production - I INCREASING R&D and INNOVATION CAPACITY Restructuring TUBITAK and its institutes Building new research infrastructures in critical areas Increasing the number of private R&D and design centers Supporting the areas of biotechnology, information and advanced material technology Putting Informatics Valley Project into practice Establishing Turkish Space Agency 39

Expanding High Value Added Production – II EXPANSION of INFORMATION and COMMUNICATION TECHNOLOGIES Supporting domestic knowledge platforms in new technology areas Expansion of new generation telecommunication networks Accelerating the transition to smart applications supported by information and communication technologies Acceleration of domestic satellite technology development efforts Increasing information security and savings through the use of open source software in the public sector Completing legal regulations on cyber security 40

Expanding High Value Added Production – III PRIORITIZE MANUFACTURING and MINING INDUSTRY Establishment of design and digital transformation centers in large OIZs Supporting medicines, medical devices, other transport vehicles, energy equipment, defense, information and communication systems Initializing domestic brand car production support program Increasing investment in mining search 41