Transcript Slide 1

FASTEST GROWING ECONOMY IN EUROPE: TURKEY
25 February 2013
Luxembourg University – Yeditepe University
Yavuz Canevi
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Turkey had lived through four “Restoration” periods:
1.
2.
3.
4.
1923 ,Republic
1946-50, Democracy (Turkish Spring)
1980’s, Global integration and market orientation through
liberalisation and deregulation (Tatcherism & Reganism)
2000 plus, Economic, Legal, Political and Structural
Restoration
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TURKEY: GREAT ACHIEVEMENTS TO BE PROUD OF
In recent years, the Turkish economy and political agenda has
undergone crucial developments. In addition to the progress made
on the lines of Copenhagen criteria for democratization and rule of
law, the economic fundamentals show an honest improvement. Yet
the change in Turkey is so overwhelming and the structural
transformation so rapid, that there is much that escapes the eye.
In fact, Turkey has turned from shaky into a solid emerging market
country.
Turkey’s economy has displayed unprecedented growth since the
beginning of the 2000s, and incredible durability and stamina in
these past few tumultuous years. A carefully thought-out
macroeconomic strategy as well as prudent fiscal policies and major
structural reforms in effect since 2003 have all combined to help
Turkey assimilate its economy into the globalized world.
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Over the past decade, Turkey has emerged as one of
the world’s most dynamic economy. Turkey’s GDP
expanded at an average rate of 4.5% from 2000 to
2011. The co-existence of electoral democracy and a
Muslim-majority population is a distinguishing
characteristics of Turkish politics.
It is no surprise that Turkey is being re-catagorized
as one of the Global Swing States along with Brazil,
India and Indonesia.
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PILLARS OF GROWTH
Demography
Population 75m, labor force 27m, households 19m
Average age 29, Golden demographic era
Emerging middle class
Single party government since 2002, High fiscal discipline
Market friendly government institutions
Pro-Privatization, pro-reform government
Politics
Economy
Infrastructure
16th largest economy (PPP based), GDP US$1.0 trillion
Sound banking industry, with 18% tier-1 Capital Adequacy
Ratio
Manufacturing hub for Europe
80% domestic driven economy, Low indebtedness
Trading partners with EU,US,Middle East,CIS,Russia,CIS, OECD
Easy access to energy resources
Developed telecommunication, transportation, education,
healthcare and financial systems compared to other emerging
markets
Legal framework mostly completed in line with EU
membership
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6
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Changes in Turkish Economy in the Last Decade
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11
Further Structural measures will enable currency stability
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DURING THE CRISIS CENTRAL BANKING MEANS MORE THAN PRICE STABILITY
Capital inflows are highly welcomed but also require a careful management. Therefore CBRT introduced some “unorthodox” policies
such as reserve requirement, credit growth, exchange rate monitoring with the objective of “Financial Stability” and “CAD” control.
Central Bank’s Multiple Instruments & Objectives
INSTRUMENTS
KEY INDICATORS
Reserve
Requirements
Credit Policy
Macroprudential
Tools
Expectations
OBJECTIVES
Price
Stability
Credit Growth
Interest Rate
Policy
Weekly Repo
Exchange Rate
Interest Rate
Corridor
Funding
Strategy
Financial
Stability
Liquidity
Policy
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15
16
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Structural measures address external imbalances
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Average CPI in inflation Periods
80
70
60
50
40
30
20
10
0
1995-2001
2002-2010
2011
2012
Source TURKSTAT,Treasury
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This is almost the first recession (2008+) in which Turkey did not
have a crisis. Thanks to our “home made” crisis in 2001 Turkey
embarked upon a series of structural reforms which enhanced the
resiliency of the country and raised Turkey’s profile in the eyes of
multinationals.
In reaction to the 2001 crisis Turkey successfully managed to make
the following reforms:
•
•
•
•
Consolidation and strengthening the banking industry
Institutionalisation of the financial sector: Independent Central
Bank, Independent Supervisory Authority, Capital Market Board,
Competition Board etc.
Macro-Prudential Policies
Policies to absorb external shocks
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As far as the banking sector is concerned today, on top of the
current strong position, with CAR around 16-18% and very low
NPL level and loan to deposit ratio, potential to grow vertically
and horizontally is very high. In fact, 26 million adults do not
have yet bank accounts in Turkey. That means penetration rate
is about 50%, therefore there is plenty of rooms to grow. No
wonder we observe new entries to the market from Russia,
Qatar, Lebanon, China, India.
Despite the current asymmetric and multipolar global
developments Turkey’s reformist challenge has been
continuing.
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As we can observe from the table, FDI surged from $
1.1 billion in 2001 to $ 22 billion in 2007 and continued
to be around $15 billion every year.
In 2010, the Financial Times noted that half of the
19000 foreign companies operating in Turkey chose to
situate their regional headquarters in Istanbul. On the
other side, foreign institutional investors own two thirds
of the total volume of ISE which was the most profitable
“exchange” globally in 2012. Today, Istanbul is rapidly
moving towards its goal of becoming an important
regional financial center if not global.
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In retrospect, behind this impressive performance there
is a new and hardworking entrepreneurial power of
SMEs (small and medium enterprises) called “Anatolian
Tigers”. This segment of the economy creates 78% of
the employment, 60% of the exports, 55% of the value
added production and 15% of the total R&D expenses.
In 2002 the number of the SMEs in the export sector
was only 3000, today this number is 50.000, by 2023 is
expected to be 70.000.
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Therefore, we must not fail to recognize that the
“Rising Turkey” story rests on its youth and its
demographic advantage. It is the past global crisis
era that created a “Revolution of Perceived
Possibilities” that has made our entrepreneurs
venture out aggressively and successfully in every
corner of the world, including AFRICA.
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Turkey, so far, is and will be one of the rare
countries with a recovering growth and declining
inflation story in CEE (European Economic
Cooperation Area). In fact it is the only country,
during recent global crisis, who had an
upgrading.
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Imminent investment grade status
. Fitch: Investment Grade
. Moody’s : One notch below Investment Grade
. Standard & Poor’s: 2 notches below Investment Grade
Turkey’s longstanding dream of being upgraded to the “Investment grade”
(IG) finally came true in November, 2012 thanks to the rating agency Fitch
RATING SCALE
Investment
Grade
Current Ratings and Outlook
Moody’s
S&P
Fitch
Aaa
AAA
AAA
Aa1
AA+
AA+
Aa2
AA
AA
Aa3
AA-
AA-
Europe
A1
A+
A+
A2
A
A
A3
A-
A-
Baa1
BBB+
BBB+
Baa2
BBB
BBB
Baa3
BBB-
BBB-
Ba1
BB+
BB+
Ba2
BB
BB
Ba3
BB-
BB-
B1
B+
B+
B2
B
B
Asia
B3
B-
B-
Caa1
CCC+
Caa2
Moddy’s
S&P
Fitch
Outlook
FC LT Debt
Outlook
FC LT Debt
Outlook
FC LT Debt
Turkey
POS
Ba1
STABLE
BB
STABLE
BBB-
Czech Republic
STABLE
A1
STABLE
AA-
STABLE
A+
Hungary
NEG
Ba1
STABLE
BB
NEG
BB+
Poland
STABLE
A2
STABLE
A-
STABLE
A-
Romania
NEG
Baa3
STABLE
BB+
STABLE
BBB-
Russia
STABLE
Baa1
STABLE
BBB
STABLE
BBB
Ukraine
NEG
B3
NEG
B+
STABLE
B
NEG
Baa1
NEG
BBB
NEG
BBB+
South Korea
STABLE
Aa3
STABLE
A+
STABLE
AA-
CCC+
Thailand
STABLE
Baa1
STABLE
BBB+
STABLE
BBB
CCC
CCC
Latin America
Caa3
CCC-
CCC-
Argentina
NEG
B3
NEG
B-u
NEG
CC
Ca
CC
CC
Brazil
POS
Baa2
STABLE
BBB
STABLE
BBB
C
C
C
Mexico
STABLE
Baa1
STABLE
BBB
STABLE
BBB
Africa and Middle East
South Africa
Source:Bloomberg
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It is likely that, by 2015, emerging economies called
BRIC plus, that Brazil, Russia India, China, Turkey and
Indonesia will be major contributors to global growth.
That means the world economy is the midst of a
transformative change.
It should be underlined that after 50 years of Ankara
Agreement while EU still remains Turkey’s top foreign
policy priority, it is not the only one. Turkey’s own
national interests, political and economic, combined
with the regional and global responsibilities in this
new and volatile world order requires and imposes
upon new roles to play. Turkey is prepared and well
equipped today to play that role at the G-20 platform,
in achieving a global, sustainable and balanced
growth.
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For those who still view Turkey in Europe as an asset rather
than liability;
– An even larger single market encompassing a dynamic
market economy with stronger positive spill over
effects on the southern European economies,
– Particularly its geo-strategic positioning with respect to
being an energy hub for oil and gas transportation
from the Caspian Sea and the Middle East to EU
– Potentially deeper cooperation on defense and
security issues,
It is now time to make a start.
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In addition let me remind you that Turkey and EU is so
much interlinked, interconnected and interdependent. But
regretfully this relationship has been the hostage to the
European domestic politics and Brussels bureaucracy. In
fact it has a meaning of deeper and wider than it looks.
•
•
•
•
•
38% of our export is with EU. (This was 60% before 2008)
60% tourism revenue comes from Europeans
80% the medium and long term financing comes from EU
Banks
80% of the FDI comes from EU countries
On the other side, surprisingly, today within the EU there
are 140.000 active entrepreneurs and they employ 640.000
European citizens in their business.
That is why we have a saying in Turkey: “If EU walks, Turkey
runs”.
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To understand “the perspiration and inspiration” behind
Turkey’s continued efforts to stay as an island of growth and
stability is important. Perspiration means hard work and
dedication, inspiration means creativity and innovation to
move up the value curve. Let us admit that the conditions in
Europe where fundamentals are getting weaker, at least for
a period and policy cupboard is almost empty while
confidence has been subject to erosion. However, in Turkey,
the fundamentals are still intact, the policy cupboard is
almost full and confidence is likely to prove resilient. This is
why time is right if not too late to eliminate the “perception
gap” on both EU and Turkey camps about each other. Those
fifty years since the 1963 Ankara Agreement should be more
than enough to justify a “make-up” action now.
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As Kemal Derviş puts it: “The economic basis for
successful Turkish membership in the EU has developed
very significantly over the last decade. It is now time for
politics to catch up with economics, exactly when
Europe as a whole is searching to define its own future.
If the EU countries and Turkey have the courage to join
forces in this search and build a common future within
very flexible European institutions, a great historic
opportunity will have been seized.” There is no doubt
that profound challenges and transformational
opportunities are ahead of us.
It seems, “For some advanced economies those good
years are behind, for Turkey yet to come” (NY Times)
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Short- and long-term challenges for Turkey
•
Short term challenges:
₋
₋
•
Risks coming from the euro zone as the main trading partner
Challenges magnified by Turkey’s large current account deficit,
which makes Turkey vulnerable to sudden capital outflows
Longer term challenges:
₋
₋
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₋
Raising the savings rate (reducing the current account deficit)
Boosting export strength and higher value content by redesigning
industrialisation policy
Reducing dependence on oil, boosting alternative energies
Attracting more FDI to one of the most diversified economies of all
emerging markets
Investing more in education and “human capital” to boost further
democratisation and state of Law.
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Turkey has come up with an attractive and motivating anchor
recently. That is VISION-2023, 100. Anniversary of the Republic.
Not only the official sector but private sector equally, may be
even strongly, committed to this anchor so that Turkey is
promoted to the “Premier League Economies”.
After years of “being the next big thing”, Turkey’s time has
come. For years there was once a sarcastic saying “Turkey has a
future and will remain that way”. That is no longer true. Turkey is
the new kid on the block. As Mr. Cameron said Turkey has
become the BRIC of EU. For the last ten years with a solid and
motivating “2023 vision” Turkey is already on the way building
her future. In the past, that is at least until 1980’s Turkey had
been a region that international business people would usually
just fly over from west to east or from east to west, on their way
home. Now, particularly after 2001, the country is exactly the
kind of place when investors can take advantage of Turkey’s
consumer boom as much as her regional “hub” position.
Overall, Turkey appears very well positioned to master the
future, given its huge potential and unique position and
determination of the private sector.
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Yavuz Canevi, Chairman
Türk Ekonomi Bankası (TEB), Turkey
Mr. Canevi began his career by earning a B.S. from Ankara University and a M.A. in
Economics from the University of Southern California. He has done postgraduate
studies and taught at the Georgia State University, Atlanta, Georgia. In 1960 he
began his career as an Inspector of Finance within The Ministry of Finance and from
1981 to 1983 he was appointed as Vice Governor of the Central Bank of Turkey.
Subsequently, he was named Governor of Central Bank of Turkey. In 1986 he
became Undersecretary of the Treasury and Foreign Trade.
He is presently the Chairman of the Board of Directors of a privately owned
commercial bank, namely, TÜRK EKONOMI BANKASI (TEB/BNP Paribas J.V.). He is
also sitting on the board of several prominent corporations, professional
organizations and NGO’s including, FNSS Defense Systems, TUSIAD (Turkish
Industrialists’ and Businessmen’s Association, IKV (Economic Development
Foundation), and Turkish Industrial Development Bank (TSKB)(1993-2012),
Chairman of Forum Istanbul.
Publications:Several articles and research papers published in different
newspapers and journals
International Publication: Political Economy of the Policy Reform
Ed.by J.Williamson Institute for International Economics, 1994
Awards:
Chevalier dans l'ordre du Merit, 1995 given by the French Government
Honorary Inspector of Finance, 1978 given by the Council of Ministers
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