MEDIUM TERM PROGRAM (2016-2018) January 11 th , 2016 WORLD ECONOMY - - PowerPoint PPT Presentation

January 11th, 2016

MEDIUM TERM PROGRAM

(2016-2018)

WORLD ECONOMY

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Global Growth (%)

4.7 3.2 3.8 2 3 4 5 2002-2007 Average 2008-2015 Average 2016-2018 Average

Global growth in the post-crisis period is lower compared to pre-crisis period.

Source: IMF World Economic Outlook Report

4 1.4 0.4 0.9 3.3 2.8 2.8 1 2 3 4 5 2002-2007 Average 2008-2015 Average 2016-2018 Average Advanced Economies Emerging Market Economies

Source: IMF World Economic Outlook Report, Treasury Calculations

Contribution to Global Growth (% points)

While emerging economies made high contribution to global growth in the post crisis period, advanced economies have accelerated most recently.

Source: IMF World Economic Outlook Report

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1 2 3 4 5 6 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015F 2016F 2017F 2018F

Inflation Rate

US Euro Area

(%)

2 4 6 8 10 12 14 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015F 2016F 2017F 2018F

Unemployment Rate

US Euro Area

(%)

While US economy is recovering, Euro Area growth is on a moderate pace.

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3.3 2.7 1.8

• 0.3
• 2.8

2.5 1.6 2.2 1.5 2.4 2.6 2.8 2.8 2.7

• 3
• 2
• 1

1 2 3 4 5 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015F 2016F 2017F 2018F

US Growth

(%)

US and Euro Area Outlook

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1.7 3.2 3.0 0.5

• 4.6

2.0 1.6

• 0.8 -0.3

0.9 1.5 1.6 1.7 1.6

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• 4
• 3
• 2
• 1

1 2 3 4 5 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015F 2016F 2017F 2018F

Euro Area Growth

(%)

 Slowdown in Developing Countries and Weak World Trade Volume  Low Commodity Prices and Weak Demand in Commodity Exporting

Countries

 Divergence in Advanced Country Monetary Policies  Slowdown in Capital Flows towards Developing Countries  Geopolitical Tensions and Political Uncertainties

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Global Economic Agenda for the Near Future

7 5.7 3.4 3.5 2 3 4 5 6 2002-2007 Average 2008-2015 Average 2016-2018 Average

Emerging Markets Economic Growth (Excl. China and India) (%)

Source: IMF World Economic Outlook Report, Treasury Calculations

The weak trend in emerging market economies will continue in the near future.

7.5 2.9 4.4 2 3 4 5 6 7 8 9 2002-2007 Average 2008-2015 Average 2016-2018 Average

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World Trade Volume Growth (%)

Growth of world trade volume decelerated after the global crisis.

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Source: IMF World Economic Outlook Report

30 60 90 120 150 2008-1 3 5 7 9 11 2009-1 3 5 7 9 11 2010-1 3 5 7 9 11 2011-1 3 5 7 9 11 2012-1 3 5 7 9 11 2013-1 3 5 7 9 11 2014-1 3 5 7 9 11 2015-1 3 5 7 9 11 2016 2017 2018

Brent Oil Price per Barrel (US Dollar)

Source: Reuters Note: MTP estimation for 2016 and after.

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Low Commodity Prices (Index 2005=100)

70 90 110 130 150 170 190 210 230 250 270 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Commodity Metal Food Energy

Source: IMF

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Source: Bloomberg

1 2 3 4 5 6 2007-Q1 Q3 2008-Q1 Q3 2009-Q1 Q3 2010-Q1 Q3 2011-Q1 Q3 2012-Q1 Q3 2013-Q1 Q3 2014-Q1 Q3 2015-Q1 Q3 2016-Q1 Q3 2017-Q1 USA Euro Area Japan

(*) Dashed lines represent Bloomberg forecasts.

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Advanced Country Policy Interest Rates*

(%)

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Source: IIF

66 127 75 125 189 222 238 561 8 407 558 440 301 319 32

• 540
• 306
• 600
• 400
• 200

200 400 600 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 F 2016 F

Private Capital Flows Towards Emerging Markets (net, $ billion)

MEDIUM TERM PROGRAM

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 Increasing stable and inclusive growth  Reducing inflation  Preserving decreasing trend in the current account deficit  Increasing competitiveness, employment and productivity  Improving quality of the fiscal discipline and strengthening

public finance

Main Objectives of Medium Term Program

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 Improving human capital  Improving efficiency in labor market  Increasing technological development and innovation capacity  Strengthening infrastructure  Enhancing institutional quality

Growth Strategy in the Program Period

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MEDIUM TERM PROGRAM 2016-2018 MAIN MACROECONOMIC AGGREGATES

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2.9 4.0 4.5 5.0 5.0 2 3 4 5 6 2014 2015 F 2016 P 2017 P 2018 P

F: Forecast P: Program

GDP Growth (%)

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5.8 4.4 3.9 3.7 3.5 1 2 3 4 5 6 7 2014 2015 F 2016 P 2017 P 2018 P

Current Account Deficit (% of GDP)

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F: Forecast P: Program

15.0 15.6 16.5 17.2 17.8 14 15 16 17 18 2014 2015 F 2016 P 2017 P 2018 P

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Total Domestic Savings (% of GDP)

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F: Forecast P: Program

9.9 10.2 10.2 9.9 9.6 9.4 9.8 10.2 10.6 2014 2015 F 2016 P 2017 P 2018 P

Unemployment Rate (%)

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F: Forecast P: Program

8.2 8.8 7.5 6.0 5.0 4 5 6 7 8 9 10 2014 2015 2016 P 2017 P 2018 P

Inflation Rate (%)

21

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P: Program

Central Government Budget Deficit (% of GDP)

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1.3 1.2 1.3 1.0 0.8 0.6 0.8 1.0 1.2 1.4 1.6 2014 2015 F 2016 P 2017 P 2018 P

F: Forecast P: Program

Central Government Primary Balance (Program Defined) (% of GDP)

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0.5 0.4 0.1 0.5 1.0 0.0 0.4 0.8 1.2 2014 2015 F 2016 P 2017 P 2018 P

F: Forecast P: Program

Public Sector Borrowing Requirement (% of GDP)

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0.6 0.0 0.3 0.3 0.3 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 2014 2015 F 2016 P 2017 P 2018 P

F: Forecast P: Program

Public Sector Primary Balance (% of GDP) (Program Defined)

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0.6 0.8 0.6 1.1 1.3 0.0 0.5 1.0 1.5 2014 2015 F 2016 P 2017 P 2018 P

F: Forecast P: Program

EU Defined Public Debt (% of GDP)

33.5 32.6 31.7 30.5 29.5 27 29 31 33 35 2014 2015 F 2016 P 2017 P 2018 P

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F: Forecast P: Program

 Implementation of 25 Priority Transformation Program which was previously disclosed to the public, will be effectively conducted according to the disclosed schedule.  Preparation and completion of regulations will be accelerated within the implementation period of 1,248 actions in the Priority Transformation Programs.  Action Plan for 2016 covering structural reforms and actions was released on the 10th December 2015 which is prepared within the context of 64th Government Program.

Structural Reforms

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Turkey’s Reform Program

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Sectoral Transformation (Micro Reforms) Structural Reforms (Macro) EU Accession Process

Reducing Import Dependency Commercialization in Priority Technology Areas

• Tech. Develop’t

and Dom. Prod’n through Public Procurement Domestic Resource Based Energy Production Energy Efficiency Improvement Enhancing Efficiency of Water Use in Agriculture Healthcare Related Industries Structural Transformation Health Tourism Improvement Transformation from Transportation to Logistics Enhancing Productivity In Manufacturing Increasing Domestic Savings and Avoiding Waste Istanbul International Financial Center Rationalization of Public Expenditures Public Revenue Quality Enhancement Business and Investment Climate Improvement Statistical Infrastructure Development Family and Dynamic Population Structure Conservation Improving Labor Market Effectiveness Reducing Informal Economy Basic and Occupational Skills Development Attracting Qualified Human Resources Healthy Life and Mobility Institutional Capacity Improvement at Local Competitiveness and Social Cohesion Enhancing Urban Regeneration Improving the Infrastructure of International Cooperation for Development

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25 Priority Transformation Programs (The 10th Development Plan)

2016 Action Plan

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Action Plan is composed of reforms and actions to be completed in 3-month, 6-month and 1-year periods.

Main objectives of the structural reform agenda within the framework of 2016 Action Plan are as follows:

 Reaching a high income level with strong and sustainable growth  ‘Inclusive Growth’ which will enable all parts of the society to benefit from the strong and sustainable growth

Labor Market Reforms

Severance Pay Part-time & Flex-Work Private Employment Agencies On-the-Job Training Attracting Global Talent (Turquoise Card)

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Enhancing Investment Climate

New Patent Law and R&D Supports Reducing Red Tape Specialized Courts Incentives for Medium and High-Tech Production

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Reforming Judicial System Specialization in Judiciary Expert Witness Mechanism Increasing the effectiveness of labor court Putting Arbitration Centers into

• peration

Increasing the effectiveness of intermediate court

• f appeal

Restructuring Notary System

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Political Ethics Law Public Procurement Law Transparency of the finance of politics Rule-Based Zoning Regulations

Enhancing Transparency & Combatting Corruption

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Public Finance Reform

Income Tax Law Tax Procedures Code Performance Based Budgeting Expenditure Reform

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Public Personnel Reform Productivity, Accountability & Transparency Quality of Public Service e-State

Public Administration Reform

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Teachers’ Academy Education Quality Index Vocational & Technical Training School-Based Budgeting Foreign Language Education Life-Long Learning Education Reform

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EU Accession Process: The Main Agenda

Enhancing Customs Union Agreement Implementation of Readmission Agreement Finalizing the Efforts on Visa Exemption

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TABLES

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2014 2015F 2016P 2017P 2018P GDP Growth (%) 2.9 4.0 4.5 5.0 5.0 GDP (Billion TL) 1,747 1,963 2,207 2,489 2,770 GDP per Capita ($) 10,390 9,286 9,364 10,030 10,659 CPI* (end year, % change) 8.2 8.8 7.5 6.0 5.0

Growth and Inflation

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F: Forecast P: Program (*) Realization as of 2015.

2014 2015F 2016P 2017P 2018P Export (Fob) 157.6 143.9 155.5 175.8 201.4 Import (Cif) 242.2 207.1 210.7 243.1 273.2 Foreign Trade Balance

• 84.6
• 63.1
• 55.2
• 67.2
• 71.8

Travel Receipts 29.6 27.0 27.0 29.4 31.8 Current Account Balance

• 46.5
• 31.7
• 28.6
• 29.3
• 29.9

Current Account Balance (% of GDP)

• 5.8
• 4.4
• 3.9
• 3.7
• 3.5

($ billion)

Balance of Payments

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F: Forecast P: Program

2014 2015F 2016P 2017P 2018P Employment (thousand) 25,933 26,655 27,292 27,960 28,604 Non-Farm Employment (thousand) 20,463 21,157 21,876 22,704 23,522 Employment Rate (%) 45.5 46.1 46.5 46.9 47.4 Labor Force Participation Rate (%) 50.5 51.3 51.7 52.1 52.4 Unemployment Rate (%) 9.9 10.2 10.2 9.9 9.6

Labor Market

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F: Forecast P: Program

2014 2015F 2016P 2017P 2018P Total Expenditures 448.8 506.0 570.5 618.6 669.3 Primary Expenditures 398.8 453.0 514.5 559.6 606.3 Interest Payments 49.9 53.0 56.0 59.0 63.0 Total Revenues 425.4 483.4 540.8 593.6 646.2 Tax Revenues 352.5 407.5 459.2 511.0 566.5 Non-Tax Revenues 72.9 75.9 81.7 82.6 79.7 Budget Balance

• 23.4
• 22.6
• 29.7
• 25.0
• 23.1

(billion TL)

Central Government Budget

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F: Forecast P: Program

2014 2015F 2016P 2017P 2018P Public Sector Balance

• 0.6

0.0

• 0.3
• 0.3
• 0.3

Central Government Budget

• 1.3
• 1.2
• 1.3
• 1.0
• 0.8

Rest of the Public Sector 0.7 1.2 1.0 0.7 0.5 Public Sector Primary Balance(*) 0.6 0.8 0.6 1.1 1.3 Central Government Budget 0.5 0.4 0.1 0.5 1.0 Rest of the Public Sector 0.1 0.4 0.5 0.6 0.3

(% of GDP)

(*) Program Defined

Public Finance

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F: Forecast P: Program