TÜRKİYE Turkey: Post-Election Economic Priorities EKONOMİSİ Bülent AKSU Berat ALBAYRAK, Phd Bakan Yardımcısı Republic of Turkey T.C. Hazine ve Maliye Bakanlığı Minister of Treasury and Finance 6 Ekim 2018 October 2018 1
Strong Growth Performance GDP growth (avg., %) 5,7 13 th largest Significant 3x increase in economy in improvement the world per capita 4,7 in poverty with $2.2 income and income trillion distribution 1924-2002 2003-2017 2 Source: TURKSTAT, Strategy and Budget Directorate, MTF calculations
Strong Employment Generation Total Employment (million people) 7 million new jobs 19 10.3 pps increase in female labor force participation 12 Positive discrimination against women, youth and disabled 2002 2013 3 3 Source: TURKSTAT
Export Supports Growth Merchandise Exports (billion $) More than 4x increase in exports 157 # of countries with an export of more than $1 billion surged from 8 to 34 36 # of products with an export of more than $1 billion increased from 9 to 34 2002 2017 4 Source: TURKSTAT
Strong Banking Sector Significant increase in asset size of Asset Size of Banking Sector (% of GDP) banking sector 105 NPL ratio decreased from 17.5% to 2.9% 59 CAR is 17.3%, above the legal and target ratios Banking sector has no open FX position. 2002 2017 5 Source : BRSA, TURKSTAT
Fiscal Discipline General government deficit (% of GDP) Gross Public Debt (% of GDP) 72,1 10,5 28,3 1,8 2002 2017 2002 2017 6 Source: MTF
Source: IIF (% of GDP, 2018Q1) (% of GDP, 2018Q1) 100 120 140 160 100 150 200 20 40 60 80 50 0 0 Lebanon Singapore Singapore Hong Kong Egypt Korea Brazil Chile Hungary UAE Ukraine China Thailand Ghana Brazil Hong Kong Czech Rep. India Malaysia Pakistan TURKEY Israel Financial Corporates Poland Kenya S. Africa Argentina Government Hungary S. Africa Mexico Poland Philippines Malaysia Russia Colombia Argentina China Ukraine Korea Israel Philippines Indonesia Czech Rep. Lebanon Mexico Egypt Thailand EM-30 Average: 32% EM-30 Average: 48% Colombia Indebtedness Indonesia India TURKEY S. Arabia Chile Ghana Nigeria Nigeria UAE Kenya S. Arabia Pakistan Russia (% of GDP, 2018Q1) 100 (% of GDP, 2018Q1) 20 40 60 80 0 100 150 200 250 50 0 Korea Lebanon Hong Kong Hong Kong China Malaysia Singapore Thailand Lebanon Chile Singapore Korea China UAE Chile Israel Israel Malaysia Poland Hungary S. Africa TURKEY Czech Rep. Non-financial Corporates Philippines Colombia Czech Rep. Brazil Households Thailand UAE Russia Hungary S. Arabia TURKEY India Indonesia Poland Mexico Brazil Russia Colombia Philippines S. Africa S. Arabia Ukraine India Ghana EM-30 Average: 36% EM-30 Average: 94% Kenya Mexico Argentina Egypt Egypt Kenya Ghana Indonesia Ukraine Pakistan Nigeria Argentina Pakistan Nigeria 7
Internal and External Shocks to Our Economy 17-25 December 15 July ECB judicial coup coup attempt Gezi events monetary tightening attempt May December 2018 2013 2015 May July December 2018 2013 2016 2013 FED interest rate Recent developments FED tapering increase in relations with the USA announcement 8
Our Priority is Combatting with Inflation CPI (end of year, % change) 29,8 Significant improvement in inflation since 2002 11,9 Rise due to exchange rate, food and energy prices in 7,4 recent period 2002 2013 2017 9 Source: TURKSTAT
Current Account Deficit 9 Current account deficit increased 8 due to strong domestic demand (12 month rolling, % of GDP) and high commodity prices 7 6,5 6 5 Strong exports and tourism in conjunction with rebalancing will 4 diminish current account deficit 3 2011-Q1 Q3 2012-Q1 Q3 2013-Q1 Q3 2014-Q1 Q3 2015-Q1 Q3 2016-Q1 Q3 2017-Q1 Q3 2018-Q1 10 Source: TURKSTAT, CBRT
REPUBLIC OF TURKEY MINISTRY OF TREASURY AND FINANCE New Economy Program Balance-Discipline-Transformation 2019-2021 11
Selected Main Economic Indicators 2018 ET 2019 P 2020 P 2021 P GDP (billion dollars, current prices) 763 795 858 926 GDP Growth (%) 3.8 2.3 3.5 5.0 Unemployment Rate (%) 11.3 12.1 11.9 10.8 Current Account Balance/GDP (%) -4.7 -3.3 -2.7 -2.6 CPI (End of year Change, %) 20.8 15.9 9.8 6.0 12
New Economy Program (NEP, 2019-21) Balance-Discipline-Transformation GDP Growth (%) NEW Economic Balancing between 5,0 2018-2020 3,8 3,5 ECONOMY Fiscal Discipline accompanying economic balancing 2,3 PROGRAM Transformation in manufacturing & exports with a ‘value - add’ perspective 2018 2019 2020 2021 BALANCE-DISCIPLINE-TRANSFORMATION 13
More Than 2 Million New Employment Target in NEP Severance pay reform Unemployment Rate (%) NEW Flexible employment in public 12,1 sector 11,9 Reviewed and redesigned ECONOMY 11,3 employment incentives 10,8 Reducing informal employment PROGRAM Enhancing vocational training 2018 2019 2020 2021 program BALANCE-DISCIPLINE-TRANSFORMATION 14
Combating Inflation Tight Monetary Policy Inflation Target (%) 20,8 NEW Strong Fiscal Discipline Financial Stability and Development 15,9 Committee (FİKKO) ECONOMY Collective Inflation Reduction Program 9,8 PROGRAM Product Monitoring Mechanism and National Agricultural Project 6,0 Leasing contracts 2018 2019 2020 2021 BALANCE-DISCIPLINE-TRANSFORMATION 15
Fiscal Discipline Savings and revenue potential of TL76 billion in 2019 Budget Deficit Target (% of GDP) Prioritization in investment projects 1,9 1,9 NEW 1,8 1,7 Mega infrastructure projects with foreign financing ECONOMY Rearrangement PPP practices Regulation of social insurance scheme PROGRAM Expanding tax base and ensure tax equity Improvement program in tax process 2018 2019 2020 2021 BALANCE-DISCIPLINE-TRANSFORMATION 16
Reducing Current Account Deficit Permanently Support for sector-oriented investment Current Account Deficit (% of GDP) projects 4,7 PPP models for technology and R&D NEW investments Structuring of Export Incentive System ECONOMY 3,3 Diversification in export 2,7 2,6 PROGRAM Reducing import dependency in energy Increasing quality and diversity in tourism 2018 2019 2020 2021 BALANCE-DISCIPLINE-TRANSFORMATION 17
Unique Aspects of NEP NEW Public Finance Measures for Banking Improvements in Transformation Office and Real Economy Taxation Practices ECONOMY PROGRAM Best Practices in Strategic Implementation and Monitoring Sectors of NEP BALANCE-DISCIPLINE-TRANSFORMATION 18
Public Finance Transformation Office Structure Operating Model Expected Impact (in 2019) BILLION TRY Savings- and revenue- The Ministry of Treasury and 60 increasing initiatives will be SAVINGS Finance identified • 31 Billion TRY – Investments Ministry level performance • 13.7 Billion TRY - Incentives targets for each initiatives • 10.1 Billion TRY – Social Security will be set • 2.5 Billion TRY – Goods and Services • 2.7 Billion TRY – Others Initiative roadmaps will be prepared and implemented BILLION TRY REVENUE 16 INCREASE Progress against performance indicators will Additional value potential is be monitored and reported Teams within other expected in following years ministries 19
Measures for Banking and Real Sector Conducting financial health assessment studies of banking sector Implementation of a comprehensive policy set according to the results of the studies Restructuring of loans of real sector companies Restructuring of Development Bank of Turkey Restructuring of Real Estate Bank of Turkey 20
High Potential of Turkey Working Age Population Growth* (%) 1,6 Dynamic and Geographical Large Strong young strategic domestic infrastructure population location market 0,5 0,1 TURKEY OECD EU-28 (*) 2002-17 average, 15-64 years 21 Source: OECD, EUROSTAT, TURKSTAT
TÜRKİYE EKONOMİSİ Bülent AKSU Bakan Yardımcısı Thank you… T.C. Hazine ve Maliye Bakanlığı 6 Ekim 2018 22
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