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ECONOMIC OUTLOOK

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  1. ECONOMIC OUTLOOK DECEMBER 2013 Economic Outlook is revized in the 1st and the 3rd weeks of the month. Recent Update: 19/12/2013

  2. OUTLINE A- MACROECONOMIC OUTLOOK B- FOREIGN TRADE OUTLOOK 1) MERCHANDISE 2) SERVICES C- INVESTMENTS , FOREIGN CAPITAL and INCENTIVES D- FREE ZONES in TURKEY E- BILATERAL, REGIONAL, PLURILATERAL and MULTILATERAL TRADE December 2013 Ministry of Economy

  3. A- MACROECONOMIC OUTLOOK December 2013 Ministry of Economy

  4. GrowthForecastsforSelectedCountries/Country Groups (%) Source: IMF, OECD, UN, WB • In 2012, Turkish economy grew by 2.2%. • According to the IMF, Turkish Economy is expected to grow by 3.8% in 2013. • In the third quarter of 2013 ,Turkish Economy grew by 4.4%. Turkish economy expanded by 4.0% in the first three quarters of 2013. December 2013 Ministry of Economy

  5. Forecasts for Merchandise and Services Trade Growth (%) Source: IMF and WTO • According to the IMF estimates, global trade volume of merchandise and services is expected to increase by 2.9% in 2013 and 4.9% in 2014. • According to the WTO estimates, global trade volume of merchandise and services is expected to increase by 2.5% in 2013 and 4.5% in 2014. December 2013 Ministry of Economy

  6. Economic Targets of 2014-2016 Medium Term Program *Actual ** Forecast (Medium Term Program, Ministry of Development – October 8, 2013) • Medium Term Program which covers 2014-2016 period aims to reduce the current account deficit gradually and increase the growth rate by minimizing the effects of global uncertainty. December 2013 Ministry of Economy

  7. Real GDP Growth of SelectedCountries/Country Groups (2012) Euro Area Source: TURKSTAT, IMF • Turkish Economy expanded by 2.2% in 2012. • TurkishEconomygrewby 3.0%, 4.5% and 4.4% in thefirstthreequarters of 2013, respectively. December 2013 Ministry of Economy

  8. AnnualEconomicGrowthRates (2002-2012) * Forecast, Medium Term Programme Source:TURKSTAT • Turkey has recovered fast from the global financial crisis. It is amongtheleastaffectedcountries from current global economic uncertainties. • Mean annual growth rate between 2002 and 2012 was 5.2%. • Real GDP growth for 2012 realized as 2.2%. December 2013 Ministry of Economy

  9. GDP Per Capita Source: Dollar value is from TURKSTAT, PPP GNI value from World Bank • Since 2002 GDP per capita has tripled from 3,492 USD to 10,497 USD. According to Purchasing Power Parity (PPP) GNI per capita surpassed 18 thousand USD. December 2013 Ministry of Economy

  10. Capacity Utilization Ratio (%) Source: TURKSTAT • Capacity utilization ratio realized as 75.6 % in November 2013. December 2013 Ministry of Economy

  11. Industrial Production Index Source: TURKSTAT • Industrial production index decreased by 0,5% year-over-year to 111.70 in November 2013(2010=100). December 2013 Ministry of Economy

  12. Inflation (Annual Percent Change) Source: TURKSTAT • Annual inflation in 2012 realized as 6.16%. • Inflation was 7.32 % in November 2013. December 2013 Ministry of Economy

  13. Real EffectiveForeign Exchange Rate (2003=100)   Source: CBRT • Compared to the previous month, as of November 2013, Turkish Lira has depreciated by 0.74% in terms of the CPI-based real effective exchange rate and appreciated by 0.21% in terms of the PPI- based real effective exchange rate. December 2013 Ministry of Economy

  14. Total Creditsand Consumer Credits (Billion TL)   Source: BRSA • Credits and specifically consumer credits increased in parallel to the growing domestic demand. • Total credits increased slightly on a monthly basis in October 2013. December 2013 Ministry of Economy

  15. CDS Premiums (Dec 18th, 2013) Source: DB Research * Higher CDS premiums indicate higher risk levels. • CDS premium of Turkey indicates a medium level of risk. December 2013 Ministry of Economy

  16. Financial Markets   Source: BRSA • Comparing to previous year, total assets of the banking sector increased by 23.1% and reached 1,636 trillion TL in October 2013. • Capital Adequacy Ratio of Turkish Banking Sector is 15.8% in September 2013. December 2013 Ministry of Economy

  17. EU Defined Budget Deficit/ GDP (%)   Source: Eurostat * 2010 • EU defined general government budget deficit/GDP ratio was 2.6% in Turkey in 2010 and Turkey satisfied the Maastricht criteria of 3%. Turkey also outperformed 22 EU Countries. • Central government budget deficit/GDP ratio was 2.0% in Turkey in 2012. • In January-November 2013 period, central government budget deficit was 1,2billion TL compared to 13,3 billion TL in the same period of 2012. December 2013 Ministry of Economy

  18. GovernmentDebt / GDP (%)   Source: Eurostat • Debt/GDP ratio of Turkey was 36.2% in 2012, which was below the level in 25 EU Countries and the Maastricht Criteria (60%). December 2013 Ministry of Economy

  19. UnemploymentRates (%) Source: TURKSTAT • InSeptember2013, theunemployment rate was 9.9%. Seasonallyadjustedunemployment rate was 10.2%. • Seasonallyadjustedunemployment rate in Euro Areawas 12.1% and 10,9% in (EU28) in October 2013. Interms of unemploymentratioTurkeyoutperformed 13 EU countriesaccordingtocurrent data. • AfterRussia, Germany, Englandand France, Turkey has the 5th largestlaborforceamongtheEuropeancountries. (2011, World Bank) December 2013 Ministry of Economy

  20. Potential of Population (2011) Source: World Bank (2011), TURKSTAT (2012) • Turkey has a population of 75.6 million in which half of the population is under the age of 30.1. • Growth rate of population is 1.2% in Turkey, 0.3% in EU Countries and -0.1% in Germany. December 2013 Ministry of Economy

  21. GrowingDynamism in Turkey'sDomestic Market • Cell phone penetration rate in households: 93.2% (2012) • Internet access rate in households: 47.2% (2012) • Internet access rate in enterprises: 92.5% (2012) • PC penetrationrate in households: 31.8% (2012) • Laptop penetrationrate in households: 27.1% (2012) • Digital camera penetrationrate in households: 27.1% (2012) • Printer penetration rate in households: 14.0% (2011) • 1 of each 5peopleowns a vehicle.(2011) December 2013 Ministry of Economy

  22. B- FOREIGN TRADE OUTLOOK December 2013 Ministry of Economy

  23. I) MERCHANDISE December 2013 Ministry of Economy

  24. Targets in MerchandiseTrade * Actual (Source: TURKSTAT) **Forecast: Medium Term Programme, Ministry of Development, 2014-2016) *** Turkish Exports Strategy for 2023 December 2013 Ministry of Economy

  25. Turkey'sShare in Global MerchandiseExports (%) • Turkey’s share in global merchandise exports was %0.83 in 2012. December 2013 Ministry of Economy

  26. ForeignTrade Volume/GDP (%) • The ratio of foreign trade volume to GDP was 49.5% in 2012. • Turkey’s integration to the international trade system is eminent. December 2013 Ministry of Economy

  27. ForeignTradeDevelopments 2011 - 2012 / January-October 2012 - 2013 * Energy corresponds to Chapter 27. Source: Ministry of Economy • In January-October period of 2013 compared to same period of 2012, exports decreased by 1.2% and imports increased by 5.8% respectively. December 2013 Ministry of Economy

  28. MonthlyExports/Imports Monthly Exports and Imports, Billion Dollar Source: TURKSTAT • In October 2013 compared to same period of 2012, exports have decreased by 8.2% and realized as 12.1 billion dollar and imports have increased by 3.7% up to the level of 19.5 billion dollar. December 2013 Ministry of Economy

  29. Distribution of ForeignTrade in BroadEconomicCategories EXPORT Source: TURKSTAT IMPORT Source: TURKSTAT December 2013 Ministry of Economy

  30. Main ExportItems * Percent change is related to the annual change in exports in 2013. Source: TURKSTAT December 2013 Ministry of Economy

  31. Main ImportItems * Percent change is related to the annual change in exports in 2013. Source: TURKSTAT December 2013 Ministry of Economy

  32. Main ExportItems (Annual) Source: TURKSTAT December 2013 Ministry of Economy

  33. Main ImportItems (Annual) Source: TURKSTAT December 2013 Ministry of Economy

  34. Main Import Partners (Share,%) Main Trade Partners (January-October2013) Main Export Partners (Share,%) Source: TURKSTAT December 2013 Ministry of Economy

  35. ExportsbyRegions Source: TURKSTAT December 2013 Ministry of Economy

  36. Imports by Regions Source: TURKSTAT December 2013 Ministry of Economy

  37. TariffRates Source: WTO Tariff Profiles, 2012 December 2013 Ministry of Economy

  38. 2) SERVICES December 2013 Ministry of Economy

  39. Targets in Services • Tourism:Besidesincreasingthenumber of touristarrivals, creating a structurethatimproves service quality, targetshigh-incomegroupsbydiversifying marketing channels, preservesnaturalcapitalandsustainability, andstimulatesthosetypes of tourismwhereTurkey has comparativeadvantages • Construction, Engineering-Architecture, Technical ConsultancyandContracting Services:Establishing a structurethatfitsTurkey’seconomicandsocialneeds, that is compatiblewithhightechnologyandinternationalrules, that is sensitivetoenvironment,thatcreateshighvalueadded, highforeignexchangeinflowandhighemployment, thatgrantshigh service quality, andthatrelies on qualifiedhumanandphysicalcapital • Commercial Services: Increasingproductivityandcommercialtradevolumein a competitiveway, andtoencouragetechnologyandinnovation December 2013 Ministry of Economy

  40. Turkey'sShare in Global Services Exports (%) Source: WTO • Turkey’s share in global exports of services was 0.99% in 2012. December 2013 Ministry of Economy

  41. TourismStatistics (Quarterly) Tourists visited (Thousand), Source: TURKSTAT • Turkey ranks as the 6th in the world and the 4th in Europe among the most favourite tourism destinations. • Turkey’s income per tourist increased by 2.6% in 2012 compared to 2011. December 2013 Ministry of Economy

  42. Contracting Services Abroad Contributions to the overall economic performance: Creating foreign exchange inflow, exports, employment, technology transfer; adding to the machinery stock, facilitating internationalization Regional Breakdown of Projects(%) • 38 out of the world’s top 250 contracting companies are Turkish. • Turkey ranks as the 2nd country (following China) in terms of the number of top contracting companies. December 2013 Ministry of Economy

  43. Logistics 2012 • Europe’s biggest truck fleet • 45 thousands trucks and 1,420 companies • Almost 1.1 million flights in 2012 • 2.4 million tonnes freight and 130 million passengers • 25. biggest fleet in the world • 48 airports and 76 ports • Total length of divided highways will reach 15 thousand kilometers. • High-speed railway projects are carried out rapidly. December 2013 Ministry of Economy

  44. Turkey’s EnergyPerspective • In thelong-term planning work, Turkey foresees to achieve the following targets in 2023 in thefield of energy; • To be able to make complete use of its potential of indigenous coal and hydro resources, • To make maximum use of renewable resources, • To incorporate nuclear energy into electricity generation • To secure rapid and continuous improvement in energy efficiency. • Turkey’sEnergy Corridor Concept • Strategy is to act as atransit country for secure & commercially viable projects andto be an energy terminal. e.g. TANAP (Trans-Anatolian Natural GasPipeline) Project SomeongoingimportantenergyprojectsthatwillhelpTurkey’sEnergy Security; • Mersin Akkuyu Nuclear Power Plant-Russia • Sinop NuclearPowerPlant-Japan December 2013 Ministry of Economy

  45. C- INVESTMENTS, FOREIGN CAPITAL and INCENTIVES December 2013 Ministry of Economy

  46. InvestmentClimate in Turkey December 2013 Ministry of Economy

  47. Time Requiredto Start a Business Source: Invest In Turkey • The required time to start a business is 6 days in Turkey. December 2013 Ministry of Economy

  48. SkilledLabourAvailability Source: Invest In Turkey • Scoring is between 0 and 10. December 2013 Ministry of Economy

  49. TheSectoralBreakdown of ForeignInvestments *January-October Source: CBRT December 2013 Ministry of Economy

  50. Breakdown of ForeignInvestmentsby Country * January-October Source: CBRT December 2013 Ministry of Economy