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ECONOMIC OUTLOOK

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  1. ECONOMIC OUTLOOK MAY 2014 Recent Update: 05/22/2014

  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 May 2014 Ministry of Economy

  3. A- MACROECONOMIC OUTLOOK May 2014 Ministry of Economy

  4. GrowthForecastsforSelectedCountries/Country Groups Source: IMF, OECD, WB • In 2013, Turkish economy grew by 4%. • IMF forecasts Turkish Economy to grow by 2.3% in 2014. May 2014 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 4.3% in 2014 and 5.3% in 2015. • According to the WTO estimates, global trade volume of merchandise and services is expected to increase by 4.7% in 2014 and 5.3% in 2015. May 2014 Ministry of Economy

  6. Economic Targets of 2014-2016 Medium Term Program *Actual (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. May 2014 Ministry of Economy

  7. Real GDP Growth of SelectedCountries/Country Groups (2013) Euro Area Source: TURKSTAT, IMF • Turkish Economy expanded by 4% in 2014. May 2014 Ministry of Economy

  8. AnnualEconomicGrowthRates (2003-2013) Source:TURKSTAT • Mean annual growth rate between 2003 and 2013 was 5%. • Real GDP growth for 2013 realized as 4%. May 2014 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 10,782 USD in 2013. According to Purchasing Power Parity (PPP) GNI per capita surpassed 18 thousand USD in 2012. May 2014 Ministry of Economy

  10. Capacity Utilization Ratio (%) Source: TURKSTAT • Capacity utilization ratio realized as 74.4% in April 2014. May 2014 Ministry of Economy

  11. Industrial Production Index Source: TURKSTAT • Industrial production index increased by 4.2% year-over-year to 120.9(2010=100) in March 2014. May 2014 Ministry of Economy

  12. Inflation (Annual Percent Change) Source: TURKSTAT • Annual inflationin 2013 was realized as 7.40% and 6.97% according to CPI and PPI, respectively. May 2014 Ministry of Economy

  13. Real EffectiveForeign Exchange Rate (2003=100)   Source: CBRT • Compared to the previous month, as of April 2014, Turkish Lira has appreciated by 5.56% in terms of the CPI-based real effective exchange rate and by 4.68% in terms of the PPI- based real effective exchange rate. May 2014 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 0.43% on a monthly basis in March 2014. May 2014 Ministry of Economy

  15. CDS Premiums (May 21st, 2014) Source: DB Research * Higher CDS premiums indicate higher risk levels. • CDS premium of Turkey indicates a medium level of risk. May 2014 Ministry of Economy

  16. Financial Markets   Source: BRSA • Comparing to previous year, total assets of the banking sector increased by 25.8% and reached 1.7 trillion TL in March 2014. • Capital Adequacy Ratio of Turkish Banking Sector is 15.7% in March 2014. May 2014 Ministry of Economy

  17. Central Government Budget Deficit/ GDP (%)   Source: Eurostat,TUİK • Central government budget deficit/GDP ratio was 1.2% in Turkey in 2013 and Turkey satisfied the Maastricht criteria of 3%. Turkey also outperformed 21 EU Countries. • In January-April 2014 period, central government budget surplus was 4.2billion TL compared to 302 million TL in the same period of 2013. May 2014 Ministry of Economy

  18. GovernmentDebt / GDP (%)   Source: Eurostat • Debt/GDP ratio of Turkey was 36.3% in 2013 which was below the level in the Maastricht Criteria (60%). Turkey also outperformed 25 EU countries. May 2014 Ministry of Economy

  19. UnemploymentRates (%) Source: TURKSTAT • In February 2014, unemployment rate was 10.2% and seasonally adjusted unemployment rate was 9.1%. • In 2013, unemployment rate was 9.0%. • Seasonally adjusted unemployment rate in Euro Area was 11.8% and 10.5% in (EU28) in March 2014. In terms of unemployment ratio Turkey outperformed 14 EU countries according to current data. • After Russia, Germany, England and France, Turkey has the 5th largest labor force among the European countries. (2012, World Bank) May 2014 Ministry of Economy

  20. Potential of Population (2012) Source: World Bank and TURKSTAT (Turkey’s data are for 2013) • Turkey has a population of 76.7 million in which half of the population is under the age of 30.4. • Growth rate of population is 1.4% in Turkey, 0.2% in EU Countries and 0.1% in Germany. May 2014 Ministry of Economy

  21. GrowingDynamism in Turkey'sDomestic Market • Cell phone penetration rate in households: 93.7% (2013) • Internet access rate in households: 49.1% (2013) • Internet access rate in enterprises: 90.8% (2013) • PC penetration rate in households: 30.5% (2013) • Laptop penetration rate in households: 31.4% (2013) • Digital camera penetration rate in households:28.1% (2013) • Printer penetration rate in households: 14.0% (2011) May 2014 Ministry of Economy

  22. B- FOREIGN TRADE OUTLOOK May 2014 Ministry of Economy

  23. I) MERCHANDISE May 2014 Ministry of Economy

  24. Targets in MerchandiseTrade * Actual (Source: TURKSTAT) **Forecast: Medium Term Programme, Ministry of Development, 2014-2016) May 2014 Ministry of Economy

  25. Turkey'sShare in Global MerchandiseExports (%) • Turkey’sshare* in global merchandiseexportswas %0.81 in 2013. *Intra EU tradeincluded May 2014 Ministry of Economy

  26. Turkey'sShare in Global Merchandiseİmports (%) • Turkey’sshare* in global merchandiseexportswas 1.33% in 2013. *Intra EU tradeincluded May 2014 Ministry of Economy

  27. ForeignTrade Volume/GDP (%) • The ratio of foreign trade volume to GDP was 49.2% in 2013. • Turkey’s integration to the international trade system is eminent. May 2014 Ministry of Economy

  28. ForeignTradeDevelopments 2012 - 2013 / January-March 2013 - 2014 * Energy corresponds to Chapter 27. Source: Ministry of Economy • In January-March period of 2014 compared to same period of 2013, exports increased by 8.9% and imports decreased by 2.2% respectively. May 2014 Ministry of Economy

  29. MonthlyExports/Imports • In March 2014 compared to same period of 2013, exports have increased by 11.9% and realized as 14.7 billion dollar and imports have decreased by 3.2% down to the level of 19.9 billion dollar. May 2014 Ministry of Economy

  30. Distribution of ForeignTrade in BroadEconomicCategories EXPORT IMPORT May 2014 Ministry of Economy

  31. Main ExportItems * Percent change is related to the annual change in exports in 2013. Source: TURKSTAT May 2014 Ministry of Economy

  32. Main ImportItems * Percent change is related to the annual change in exports in 2013. Source: TURKSTAT May 2014 Ministry of Economy

  33. Main ExportItems (Annual) Source: TURKSTAT May 2014 Ministry of Economy

  34. Main ImportItems (Annual) Source: TURKSTAT May 2014 Ministry of Economy

  35. Main Import Partners (Share,%) Main Trade Partners (Jan-Mar 2014) Main Export Partners (Share,%) Source: TURKSTAT May 2014 Ministry of Economy

  36. ExportsbyRegions Source: TURKSTAT May 2014 Ministry of Economy

  37. Imports by Regions Source: TURKSTAT May 2014 Ministry of Economy

  38. TariffRates Source: WTO Tariff Profiles, 2012 May 2014 Ministry of Economy

  39. 2) SERVICES May 2014 Ministry of Economy

  40. Targets in Services Inthescope of 2023 Strategyfor Commercial Services; • To increasetheshare from the world’s commercial trade • To reach 150 billion USD of service exports May 2014 Ministry of Economy

  41. 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 May 2014 Ministry of Economy

  42. Turkey'sShare in Global Services Exports (%) Source: WTO • Turkey’sshare* in global exports of serviceswas 0.95% in 2013. *Intra EU tradeincluded May 2014 Ministry of Economy

  43. Turkey'sShare in Global Services Imports (%) Source: WTO • Turkey’sshare* in global imports of serviceswas 0.51% in 2013. *Intra EU tradeincluded June2013 Ministry of Economy

  44. 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 in 2013. • Turkey’s income per tourist increased by 3.6% in 2013 compared to 2012. May 2014 Ministry of Economy

  45. Contracting Services Abroad Contributions to the overall economic performance: Creating foreign exchange inflow, exports, employment, technology transfer; adding to the machinery stock, facilitating internationalization RegionalBreakdown 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. May 2014 Ministry of Economy

  46. Logistics 2013 • Europe’s biggest truck fleet • 45 thousands trucks and 1,420 companies • Almost 1.2 million flights in 2013 • 2.6 million tones freight and 149.5 million passengers • 25. biggest fleet in the world • 52 airports and 76 ports May 2014 Ministry of Economy

  47. Turkey’s EnergyPerspective In the long-term planning work, Turkey foresees to achieve the following targets in 2023 in the field 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 May 2014 Ministry of Economy

  48. C- INVESTMENTS, FOREIGN CAPITAL and INCENTIVES May 2014 Ministry of Economy

  49. InvestmentClimate in Turkey May 2014 Ministry of Economy

  50. Time Requiredto Start a Business Source: Invest In Turkey • The required time to start a business is 6 days in Turkey. May 2014 Ministry of Economy