Transcript Slide 1

Recent
Developments in the World Economy and
Implications for Turkey
Mark Lewis
IMF Senior Resident Representative to Turkey
Presentation at Atılım University
Ankara
May 27, 2013
RECENT DEVELOPMENTS IN THE
GLOBAL ECONOMY
The risks have been reduced, but the
global economy remains weak


Policies have addressed major risks but other risks remain
Global economy in broadly three speeds




Emerging market and developing countries (EMDE): coping well
US, other advanced economies (AE): shift from public to private
demand in train
Euro area: the handover from public to private demand is still stuck
Priorities


AE: achieving a better fiscal/financial/monetary policy mix
EMDE: rebuilding policy room for maneuver and structural reforms
Activity is beginning to recover after the
slowdown in 2012
Industrial Production and World Trade
(annualized percent change of three-month moving average over previous
three-month moving average)
30
25
Advanced economies
20
Emerging market economies
CPB trade volume index
15
10
5
0
-5
Feb. 2013
-10
2010
2011
2012
Source: Haver Analytics; Netherlands Bureau for Economic Policy Analysis for CPB trade volume index; and IMF staff calculations.
2013
Financial conditions have also improved
Net Portfolio Capital Flows to Emerging Markets
Equity Markets
(billions of US dollars; quarterly flows)
(2007 = 100; national currency)
140
40
Others
LAC
120
30
Developing Asia
100
20
80
10
60
0
40
DJ EURO STOXX PRC
S&P 500
20
-10
Emerging Market
Japan - Topixx
0
00
02
04
06
08
10
Sources: Haver Analytics; EPFR Global; and IMF staff calculations.
12 Apr. 13
2005
2006
2007
2008
2009
2010
2011
2012
-20
2013
However, bank lending conditions still
tight, especially in the euro area
Lending Conditions
Nonfinancial Firm and Household Credit Growth 1\
(Net percentage of domestic respondents tightening
standards for loans)
(year-over-year percent change)
15
100
United States
80
Euro area
U.S.
10
Spain
Italy
Euro area
60
5
40
0
20
-5
0
-20
2007
12:Q4
12:Q2
2008
2009
2010
2011
2012
-10
2006
2007
2008
2009
2010
2011
2012
Sources: Lending surveys by the Bank of England, European Central Bank, Bank of Japan, and the U.S. Federal Reserve for house holds and
corporations; Haver Analytics; and IMF staff estimates.
1\ Flow of funds data are used for the euro area, Spain and the United States. Italian bank loans to Italian residents are corrected for securitizations.
Credit growth in Emerging Markets (EMs)
has slowed
Credit to GDP
Real Credit Growth
(percent)
(percent change from one year ago)
140
80
40
Brazil
India
130
70
35
China
Turkey
120
60
110
50
30
25
20
100
40
15
90
30
10
80
20
Brazil
India
Turkey
China (Left Scale)
70
5
10
60
0
Jan. 13
0
2006
08
10
12:
Q4
Sources: Haver Analytics; IMF, World Economic Outlook; and IMF staff calculations.
2010
2011
2012
-5
2013
7
The Outlook is still weak and uncertain.
The forecast has been revised down
WEO Real GDP Growth Projections
(percent change from a year earlier)
World
U.S.
Euro Area
Japan
Brazil
Russia
India
China
Turkey
2013
(April 2013)
3.3
1.9
-0.3
1.6
3.0
3.4
5.7
8.0
3.4
2013
(Jan. 2013)
3.5
2.0
-0.2
1.2
3.5
3.7
5.9
8.2
3.4
2014
(April 2013)
4.0
3.0
1.1
1.4
4.0
3.8
6.2
8.2
3.7
2014
(Jan. 2013)
4.1
3.0
1.0
0.7
4.0
3.8
6.4
8.5
3.9
Source: IMF, World Economic Outlook.
8
The forecast suggests a three-speed
global economy
Advanced Economies
Emerging Economies
(percent change from a year earlier)
(percent change from a year earlier)
15
15
April WEO
2013
Jan. WEO
2014
2013
2014
United States 1.9
3.0
2.0
3.0
Euro area
-0.3
1.1
-0.2
1.0
Japan
1.6
1.4
1.2
0.7
10
10
5
5
0
0
April WEO
2013
2014
-5
-10
2000
02
04
Source: IMF Staff Estimates.
06
08
10
12
14:
Q4
Jan. WEO
2013
2014
Emerging Asia
7.1
7.3
7.1
7.5
Latin America
3.4
3.9
3.6
3.9
SSA
5.6
6.1
5.8
5.7
-5
-10
2000
02
04
06
08
10
12
14:…
LAC: Latin America and the Caribbean;
SSA: Sub-Saharan Africa; data are interpolated from annual frequency
values
What to do? Work on medium-term policies
and don’t overburden monetary policy!
Euro area
• Accommodative monetary policy (2014 inflation < < 2% !!) and
working on better pass through
• Restructuring weak banks, with help of ESM if needed
• Stronger EMU: banking union and capital market integration
• More entitlement reform and more structural reform
U.S and Japan
• Medium-term fiscal plans and entitlement reform
• U.S. needs to durably address debt ceiling
• Japan needs a strong medium-term growth strategy
• Accommodative monetary policy, including BoJ reforms
EMDC
• Rebuild policy space
• Watch for legacies of past credit growth or ongoing expansions
• Structural reforms: to reaccelerate potential output, absorb
inflowing capital productively, rebalance growth
FINANCIAL STABILITY RISKS
REMAIN
In the U.S, corporations are building
more debt
U.S. high-yield covenant-lite loans
U.S. corporate debt-to-earnings
(Billions of U.S. dollars )
(100 = start of cycle)
140
120
1997:Q1
130
(Percen
35
Cov-lite loan issuance (left scale)
Share of institutional leveraged loans (right
scale)
100
30
2000:Q4
25
120
80
20
110
60
15
2007:Q4
100
40
10
Current cycle
(2011:Q4)
90
20
80
5
0
0
4
8
12
Quarters from start of cycle
16
0
20
’97
’99
’01
’03
’05
’07
’09
’11 ’12
10
Emerging Markets are also accumulating
debt
Selected emerging market
bond, equity and loan issuance (U.S. dollar, bn)
Emerging Market nonfinancial corporate
leverage (percent, debt-to-equity)
120
2,500
Turkey
Equities
100
Loans
2,000
China
Philippines
Brazil
Chile
Thailand
Bonds
Korea
Mexico
India
80
1,500
2012
Malaysia
Indonesia
60
Poland
1,000
Russia
40
Hungary
South Africa
Peru
Romania
500
Colombia
20
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
0
0
0
20
40
60
80
2007
100
120
12
Very sensitive to external factors
Nonresident holdings of local currency
government debt (share of total; in percent)
Local currency yield tightening
(Dec 08-Dec 12) (in basis points)
Yield
Hungary
40
External Factors Domestic Factors
0
-50
35
-142
Indonesia
-100
30
Malaysia -150
25
-200
Poland
20
-465
South Africa
Turkey
Mexico
-250
-300
15
Brazil
-323
-350
10
Korea
5
0
2007
-400
-450
-500
2008
2009
2010
2011
2012
2013
13
For financial stability, dealing with old
risks and new challenges
Remaining Old Risks
Euro
Area
• Stronger
integration
• Make banks,
corporates and
sovereigns safer
U.S. &
Japan
• Keep sovereigns
safe
Global
• Safer global
financial system
New Challenges
U.S.
Emerging
Markets
• Avoid financial
excesses
• Smooth exit
• Avoid bad
releveraging
• Keep the guard up
15
TURKEY ACHIEVED A “SOFT
LANDING”
16
Turkey: a welcome slowing of growth
and domestic demand
30
Contributions to Growth
(Percent, contribution to real GDP)
20
10
0
-10
Net Exports
Domestic Demand
Real GDP growth
-20
-30
17
Lower imports reduce the current account
deficit; although financing still is short term
40
Current Account
(Billion of U.S. dollar)
20
Current Account Financing
(12-m rolling, billions of U.S. dollar)
90
70
0
50
-20
30
-40
10
-60
Non-fuel
-10
MLT debt
Non-debt flows
CAD
Jan-13
Jul-12
Oct-12
Jan-12
Apr-12
Oct-11
Jul-11
Apr-11
Jan-11
Jul-10
Oct-10
Jan-10
Apr-10
Oct-09
Jul-09
Apr-09
Jan-09
Jan-08
-30
Apr-08
Jan-13
Oct-12
Jul-12
Jan-12
Apr-12
Oct-11
Jul-11
Apr-11
Jan-11
Jul-10
Oct-10
Jan-10
Apr-10
Oct-09
Jul-09
Apr-09
Jan-09
Jul-08
Oct-08
Apr-08
Jan-08
-100
ST Debt
Jul-08
-80
Oct-08
Total
18
Inflation is not high
12.0
Inflation
(Percent)
10.0
8.0
6.0
4.0
Headline
CORE,I
Services
2.0
0.0
Jan-10
Mar-10
Jun-10
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Unemployment has increased, but not
much
16
16
Unemployment Rate
(Percent)
2010
14
14
2011
2012
12
12
10
10
8
8
6
6
J
F
M
A
M
J
J
A
S
O
N
D
20
Short-term model suggests momentum in Q1
6.0
Actual and Estimated GDP Growth
(q/q sa, non-annualized)
4.0
2.0
0.0
Actual
growth
-2.0
-4.0
-6.0
-8.0
Estimated
growth
Reflecting, among other things,
faster credit growth
22
A soft landing is a new achievement
23
THE GLOBAL ECONOMY AND
TURKEY
24
Domestic savings are low, which means:
Savings, 2012
(% of GDP)
60
50
40
30
20
10
0
There is a high current account deficit
Current Account Balance, 2012
(% of GDP)
8
6
4
2
0
-2
-4
-6
-8
Making Turkey dependent on foreign
capital inflows
30
25
35
External Financing Requirement
(2011, percent of GDP)
30
25
20
20
15
15
10
10
5
5
0
0
Brazil
India
Poland
Turkey
27
Source: IMF DTS and
Turkstat
CIS
EU
MENA
Developing ASIA
Sep-12
May-12
Jan-12
Sep-11
May-11
Jan-11
Sep-10
May-10
Jan-10
Sep-09
May-09
Jan-09
Sep-08
May-08
Jan-08
Sep-07
May-07
Jan-07
Sep-06
May-06
Jan-06
Sep-05
May-05
Jan-05
Sep-04
May-04
Jan-04
Sep-03
May-03
Jan-03
Sep-02
May-02
Jan-02
Sep-01
May-01
Jan-01
Sep-00
May-00
Jan-00
There has been trade diversification, but
the EU still important
Turkey Total Trade (excl. Gold, 3MMA, %)
60
50
40
30
20
10
0
Dec-00
Mar-01
Jun-01
Sep-01
Dec-01
Mar-02
Jun-02
Sep-02
Dec-02
Mar-03
Jun-03
Sep-03
Dec-03
Mar-04
Jun-04
Sep-04
Dec-04
Mar-05
Jun-05
Sep-05
Dec-05
Mar-06
Jun-06
Sep-06
Dec-06
Mar-07
Jun-07
Sep-07
Dec-07
Mar-08
Jun-08
Sep-08
Dec-08
Mar-09
Jun-09
Sep-09
Dec-09
Mar-10
Jun-10
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
A challenge is to preserve and expand
market share
Market Share Developments
(Turkey's exports in % of region's Imports, 2000=100, 6MMA)
350
300
250
200
150
100
50
0
Source: IMF
CIS
EU
MENA
Developing Asia
Turkey will benefit from more Foreign
Direct Investment
FDI, 2011 (Net Inflows, % of GDP)
8
7
6
5
4
3
2
1
0
Source: World Bank
30
Thank You!
For more information:
IMF Website: www.imf.org
IMF Turkey Website: www.imf.org/Ankara