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

Medium Term Program 2018-2020

September 27th, 2017

Global Economy Turkish Economy Medium Term Program

Outline

2

Global Economy

Recovery in Global Growth

4.8 3.3 3.7 2 3 4 5 2002-07 2008-17 2018-20F (Avg. Growth, %)

F: Forecast 4 Source: IMF World Economic Outlook Report

53.1 57.4 48 50 52 54 56 58 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 (Manufacturing) Global PMI Eurozone PMI

Source: Bloomberg 5

Indicators Point out Revival in Production

7.7 3.1 3.9 1 2 3 4 5 6 7 8 9 2002-07 2008-17 2018-20F (Avg. Growth, %)

World Trade Volume is Picking Up

6 F: Forecast Source: IMF World Economic Outlook Report

3.4 1.9 4.4 2 4 6 8 10 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017E 2018F (Avg., %) World Advanced Economies Emerging Economies

Moderate Global Inflation

7 E: Estimate F: Forecast Source: IMF World Economic Outlook Report

• 800
• 600
• 400
• 200

200 400 600 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017E 2018F (private, net, billion $) Emerging Markets Emerging Markets (excluding China)

Emerging Market Capital Flows Turn Positive

E: Estimate F: Forecast 8 Source: IIF

9

(Brent, $/barrel) 25.0 72.7 97.7 61.9 112.0 44.0 60.0 20 30 40 50 60 70 80 90 100 110 120 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Oil Prices Expected to Grow Slightly

Note: Dashed line represents MTP period. Source: IMF World Economic Outlook, Reuters Futures

Downward Risks to the Global Economy

10

Faster than Expected Monetary Tightening Geopolitical Tensions Protectionism in Global Trade High Indebtedness and Aging Population

Turkish Economy

4.7 4.8 5.6 4.0 4.2 4.4 4.6 4.8 5.0 5.2 5.4 5.6 5.8 1924-2002 1924-2016 2003-16 (Avg. Growth, %)

Source: TURKSTAT, Ministry of Development 12

Improved Growth Performance

13

9,208 24,636 5,000 10,000 15,000 20,000 25,000 2002 2016 3,581 10,883 2,000 4,000 6,000 8,000 10,000 12,000 2002 2016

Rising Income per Capita

(GDP pc , $) (GDP pc, $, PPP)

Source: TURKSTAT

14

Real Convergence with Developed Countries

37.1 62.2 30 40 50 60 70 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 (GDP pc, PPP $, Turkey/EU)

Source: OECD

20.6 27.2 19 20 21 22 23 24 25 26 27 28 2009 2010 2011 2012 2013 2014 2015 2016

Source: TURKSTAT

Employment (million people)

15

Strong Employment Growth

• 8.3
• 3.8
• 10
• 8
• 6
• 4
• 2

2 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

Source: TURKSTAT, CBRT

(12 month rolling, % of GDP)

16

Current Account Deficit at Manageable Level

70.7 9.0 10 20 30 40 50 60 70 80 1989-2002 2003-16 (Avg., inflation, %, year end)

Source: TURKSTAT, Ministry of Development 17

Significant Progress in Price Stability

18

10.5 1.3

• 1.5

0.0 1.5 3.0 4.5 6.0 7.5 9.0 10.5 12.0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 General Government Deficit (% of GDP)

Source: Ministry of Development, TURKSTAT

Maastricht Criteria: 3%

Ensured Fiscal Discipline

4.8 3.5 3.0 1.7 1.3 1 2 3 4 5 EMs G7 OECD Euro Area TURKEY General Government Deficit (% of GDP, 2016) Maastricht Criteria: 3%

Source: IMF, OECD, Ministry of Development, TURKSTAT

Relatively Low Fiscal Deficit

19

20

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

Sharp Decline in Public Debt

Source: Undersecretariat of Treasury, TURKSTAT

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

Favorable Debt Dynamics

21 Source: IMF, OECD, Undersecretariat of Treasury, TURKSTAT

Medium Term Program 2018-2020

23

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

24

3.2 5.5 5.5 5.5 5.5 2 3 4 5 6 2016 2017 E 2018 P 2019 P 2020 P

E: Estimate P: Program

(%)

GDP Growth

25

10,883 10,579 11,409 12,100 13,024 8,000 9,000 10,000 11,000 12,000 13,000 14,000 2016 2017 E 2018 P 2019 P 2020 P

E: Estimate P: Program Note: World Bank high income threshold is calculated by using Atlas Method.

($)

GDP per Capita

World Bank high income threshold ($12,235)

26

10.9 10.8 10.5 9.9 9.6 9.0 9.5 10.0 10.5 11.0 11.5 2016 2017 E 2018 P 2019 P 2020 P

E: Estimate P: Program

(%)

Unemployment Rate

27

8.5 9.5 7.0 6.0 5.0 3 4 5 6 7 8 9 10 2016 2017 E 2018 P 2019 P 2020 P

E: Estimate P: Program

(CPI, year end, % )

Inflation Rate

28

3.8 4.6 4.3 4.1 3.9 3.0 3.5 4.0 4.5 5.0 2016 2017 E 2018 P 2019 P 2020 P

E: Estimate P: Program

(% of GDP)

Current Account Deficit

29

1.1 2.0 1.9 1.9 1.6 0.5 1.0 1.5 2.0 2.5 2016 2017 E 2018 P 2019 P 2020 P

E: Estimate P: Program

(% of GDP)

Central Government Budget Deficit

30

1.0 2.4 2.1 1.9 1.3 0.5 1.0 1.5 2.0 2.5 3.0 2016 2017 E 2018 P 2019 P 2020 P

E: Estimate P: Program

(% of GDP)

Public Sector Borrowing Requirement

31

28.1 28.5 28.5 28.0 27.5 27.0 27.5 28.0 28.5 29.0 2016 2017 E 2018 P 2019 P 2020 P

E: Estimate P: Program

(% of GDP)

EU Defined Public Debt

32

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

Public Policy Priority Areas to Support Growth and Employment

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

Maintaining Macroeconomic Stability – I

33

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

Maintaining Macroeconomic Stability – II

34

MAINTAINING FINANCIAL STABILITY and INCREASING DOMESTIC SAVINGS

Limiting systemic risks Deepening the financial system and increasing domestic savings Developing interest-free financial system

Maintaining Macroeconomic Stability – III

35

SUSTANABILITY in CURRENT ACCOUNT BALANCE

Increasing exports Reducing energy-import dependency Improving financial conditions Improving the efficiency in logistics services

Maintaining Macroeconomic Stability – IV

36

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

Boosting Human Capital and the Quality of Labor Force – I

37

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

Boosting Human Capital and the Quality of Labor Force – II

38

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

Expanding High Value Added Production - I

39

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

Expanding High Value Added Production – II

40

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

Expanding High Value Added Production – III

41

STRENGTHENING AGRICULTURAL PRODUCTION

Reorganizing of agricultural support system Supporting the transition to large-scale agricultural business model Improving water use efficiency Bringing idle agricultural land into production Increasing production in livestock

Expanding High Value Added Production – IV

42

IMPROVEMENT of BUSINESS and INVESTMENT PROCESSES

Transferring bureaucratic permits, approvals and transactions to electronic environment to speed up and increase the quality of processes Strengthening the capacity of Investment Support Offices Finalizing EIA decisions within maximum of 2 months

Improving Business & Investment Climate – I

43

EASING ALLOCATION of SUITABLE LAND for INVESTMENT

Completing the geographic information systems infrastructure to determine suitable land for investment Easing allocation of suitable land for large-scale investments

Improving Business & Investment Climate – II

44

INCREASING the JUDICIAL TRANSPARENCY in BUSINESS & TRADE CONFLICTS

Providing specialization of courts in investment, trade and finance and shortening trial length Expanding the new execution office model

Improving Business & Investment Climate – III

45

FACILITATE SME’S ACCESS TO FINANCE

Developing new models of innovative finance opportunities and techno start-ups Initiating the regional venture-capital system Enhancing suretyship insurance

Improving Business & Investment Climate – IV

46

RECONSTRUCTION and COORDINATION in PUBLIC SECTOR

Preparing the road map to the system of Executive Presidency Clarifying mandates among different public institutions Limiting establishment of new institutions in public sector and reorganizing the existing institutions when required Enacting Governance Code for State Economic Enterprises Re-arranging Metropolitan Municipality Law Strengthening Development Agencies and improving their governance, auditing and financial positions

Enhancing Institutional Quality in Public Sector – I

47

IMPROVING the QUALITY of HUMAN CAPITAL in PUBLIC SECTOR

Strengthening relationship between central and provincial institutions Reorganizing the Public Administration Institute for Turkey and Middle East as a training center for civil servants Conducting performance evaluation regarding public services and making the results publicly known

Enhancing Institutional Quality in Public Sector – II

48

IMPROVING the EFFICIENCY of JUSTICE and SECURITY SERVICE

Reducing trial length Upgrading the capacity of security forces

Enhancing Institutional Quality in Public Sector – III

49

Tables

2016 2017E 2018P 2019P 2020P GDP Growth (%) 3.2 5.5 5.5 5.5 5.5 GDP (Billion TL) 2,609 3,035 3,446 3,872 4,321 GDP per Capita ($) 10,883 10,579 11,409 12,100 13,024 GDP per Capita (PPP, $) 24,636 26,140 27,915 29,804 31,774 CPI (end year, % change) 8.5 9.5 7.0 6.0 5.0 51

51 E: Estimate P: Program

Growth and Inflation

2016 2017E 2018P 2019P 2020P Export (Fob) 142.5 156.5 169.0 182.0 195.0 Import (Cif) 198.6 222.0 237.0 253.0 272.0 Foreign Trade Balance

• 56.1
• 65.5
• 68.0
• 71.0
• 77.0

Travel Receipts 18.7 20.0 23.0 26.0 29.0 Current Account Balance

• 32.6
• 39.2
• 40.0
• 40.9
• 41.9

Current Account Balance (% of GDP)

• 3.8
• 4.6
• 4.3
• 4.1
• 3.9

(Billion $) 52

52

Balance of Payments

E: Estimate P: Program

2016 2017E 2018P 2019P 2020P Employment (Thousand) 27,205 28,152 29,193 30,281 31,369 Non-Farm Employment (Thousand) 21,900 22,852 23,918 25,048 26,219 Employment Rate (%) 46.3 47.0 47.8 48.7 49.5 Labor Force Participation Rate (%) 52.0 52.7 53.4 54.1 54.7 Unemployment Rate (%) 10.9 10.8 10.5 9.9 9.6 53

53

Labor Market

E: Estimate P: Program

2016 2017E 2018P 2019P 2020P Total Expenditures 584.1 673.7 762.8 838.5 912.9 Primary Expenditures 533.8 616.2 691.1 753.5 816.9 Interest Payments 50.2 57.5 71.7 85.0 96.0 Total Revenues 554.1 612.0 696.8 765.3 842.3 Tax Revenues 459.0 520.5 599.4 663.9 730.5 Non-Tax Revenues 95.1 91.6 97.4 101.4 111.8 Budget Balance

• 29.9
• 61.7
• 65.9
• 73.2
• 70.5

(Billion TL) 54

54

Central Government Budget

E: Estimate P: Program

2016 2017E 2018P 2019P 2020P Public Sector Balance

• 1.0
• 2.4
• 2.1
• 1.9
• 1.3

Central Government Budget

• 1.1
• 2.0
• 1.9
• 1.9
• 1.6

Rest of the Public Sector 0.1

• 0.4
• 0.2

0.0 0.3 Program Defined Public Sector Balance

• 0.6
• 1.5
• 1.0
• 0.4

0.2 Central Government Budget

• 0.5
• 1.0
• 0.6
• 0.2

0.1 Rest of the Public Sector

• 0.1
• 0.5
• 0.4
• 0.2

0.1 (% of GDP) 55

55

Public Finance

E: Estimate P: Program

Medium Term Program 2018-2020

September 27th, 2017