1. General Directorate of Annual Programs and Conjunctural Evaluations1 15 February 2010 Turkish Economy: Macroeconomic Developments in 2009 and Medium Term Programme (2010-2012) Ahmet Sabri EROGLU, Ph.D. State Planning Organization ECO – 20th Meeting of Regional Planning Council Antalya, Turkey

2. General Directorate of Annual Programs and Conjunctural Evaluations2 OUTLINE: World Economy Turkish Economy Measures Against Crisis Medium Term Program

3. General Directorate of Annual Programs and Conjunctural Evaluations3 WORLD ECONOMY in 2009 and 2010

4. General Directorate of Annual Programs and Conjunctural Evaluations4 Source: IMF, World Economic Outlook, January 2010. (*) Estimate. World Output (Annual % Change)

5. General Directorate of Annual Programs and Conjunctural Evaluations5 Source: IMF, World Economic Outlook, January 2010. Estimations for Output Growth (%)

6. General Directorate of Annual Programs and Conjunctural Evaluations6 (*) Estimate. Source: IMF, World Economic Outlook, January 2010. World Trade (Annually % Change)

7. General Directorate of Annual Programs and Conjunctural Evaluations7 Global Crisis Affected Turkish Economy in Three Channels:  Foreign Trade,  Foreign Financing,  Expectations. The Effects of Global Crisis on the Turkish Economy

8. General Directorate of Annual Programs and Conjunctural Evaluations8 GDP (By Production) Growth Rates (Annually % Changes)

9. General Directorate of Annual Programs and Conjunctural Evaluations9 GDP (By Expenditures) Growth Rates (Annually % Changes)

10. General Directorate of Annual Programs and Conjunctural Evaluations10 Capacity Utilization Rate – Industrial Production Index

11. General Directorate of Annual Programs and Conjunctural Evaluations11 Some Indicators for Domestic Demand

12. General Directorate of Annual Programs and Conjunctural Evaluations12 Consumer Confidence Indices

13. General Directorate of Annual Programs and Conjunctural Evaluations13 Central Bank - Real Sector Confidence Index

14. General Directorate of Annual Programs and Conjunctural Evaluations14 Inflation Rate (CPI, 12 Monthly % Changes)

15. General Directorate of Annual Programs and Conjunctural Evaluations15 Central Bank Short Term Interest Rates (%)

16. General Directorate of Annual Programs and Conjunctural Evaluations16 Source: Turkstat Exports (ISIC Rev,3, Billions of Dollars) Annually% Changes 20072008200909/08 Total107,3132,0102,2-22,6 Basic Metals12,322,615,1-33,1 Vehicles17,019,412,9-33,5 Clothing11,811,59,6-16,5 Textile10,811,39,6-15,6 Machinery & Equipments8,09,88,1-17,3 Food & Beverages5,26,55,9-8,4 Chemicals4,15,04,3-13,9 Radio, TV, Communication Equ.2,82,31,9-14,5 Agriculture & Animal Products3,73,94,310,5 Non-Metals & Minerals3,44,33,8-12,8 Metal Products4,35,54,5-19,2 Memo Item: Pearls & Other Precious Stones2,65,45,910,1

17. General Directorate of Annual Programs and Conjunctural Evaluations17 Source: Turkstat Imports (BEC, Billons of Dollars) Annually% Changes 20072008200909/08 Total170,1202,0140,8-30,3 Consumption Goods18,721,519,3-10,4 - Otomobille4,74,64,3-6,5 - Others14,016,915,0-11,2 Capital Goods27,128,021,4-23,5 Intermediate Goods123,6151,799,4-34,5 - Crude Oil11,815,6- - Other111,8146,1- Memo Items: - Energy (Item 27)33,948,329,9-38,1 - Pearls & Other Precious Stones 5,95,72,0-64,6

18. General Directorate of Annual Programs and Conjunctural Evaluations18 Foreign Trade (Billions of Dollars)

19. General Directorate of Annual Programs and Conjunctural Evaluations19 Current Account Deficit ( % of GDP)

20. General Directorate of Annual Programs and Conjunctural Evaluations20 Current Account Balance (Excluding Energy Price Effects, % of GDP)

21. General Directorate of Annual Programs and Conjunctural Evaluations21 Current Account Deficit Financing 200720082009 1. CURRENT ACCOUNT BALANCE-38,311-41,947-13,854 2. TOTAL FINANCING (A+B+C+D)38,31141,94713,854 A. CAPITAL ACCOUNTS (Net)52,23342,596190 a. Foreign Direct Investment (Net)19,94115,7206,026 b. Short Term (Net)-1,3995,558753 c. Long Term (Net)33,20024,492-8,049 d. Others (Net)491-3,1741,460 B. IMF CREDITS (Net)-3,9831,701-680 C. CHANGE IN RESERVES-11,558-8,0035,907 D. NET ERRORS & OMISSIONS1,6195,6538,437 (Million of Dollars)

22. General Directorate of Annual Programs and Conjunctural Evaluations22 Unemployment Rate

23. General Directorate of Annual Programs and Conjunctural Evaluations23 (*) Estimation was 62,8 Billons of TL. Central Government Budget Deficit (Billions of TL)

24. General Directorate of Annual Programs and Conjunctural Evaluations24 (*) Estimation was 6,6 percent. Central Government Budget Deficit / GDP (%)

25. General Directorate of Annual Programs and Conjunctural Evaluations25 (*) The estimation was 47,3 percent. Total Public Debt Stock (EU Definition) / GDP

26. General Directorate of Annual Programs and Conjunctural Evaluations26 Since the second half of 2008;  Expenditures on Infra-structure investments in public sector are increased (GAP and high ways and roads)  Additional measures are to be taken in salary and wages in public sector  Employment packages is introduced,  For specific goods and services, reductions on Private Consumption Taxes and VAT are launched,  Financial supports for SME’s and exporters are increased,  Transfers from Central Government Budget to local administrations are increased,  Credit Guarantee Fund is reorganized, Measures Against Global Crisis (1)

27. General Directorate of Annual Programs and Conjunctural Evaluations27  Central Bank introduced some measures by monitoring the liqudity conditions of foreign currency and TL in the money markets. In this perspectives:  Policy rates are reduced by 10,25 percentage points since November 2008 and down to 6,50 percentage in December 2009.  Central Bank extend credits to the banks that are the subject of uncertainty and lack of confidence in the event of acceleration of fund withdrawals and uncertainty and lack of confidence in the banking system,  Foreign currency required reserve ratio was lowered by the Bank, this reduction has provided an additional foreign exchange liquidity for the banking system. Measures Against Global Crisis (2)

28. General Directorate of Annual Programs and Conjunctural Evaluations28 2008200920102008-2010 Income Measures304.0771.7485.855 Expenditures Measures7.88017.21721.14146.237 Direct Impact on the Budget 7.91021.29422.88952.092 In Percent of GDP0.832.252.225.31 Budgetary Cost of Measures (Millions of TL)

29. General Directorate of Annual Programs and Conjunctural Evaluations29 MEDIUM TERM PROGRAM (2010-2012)

30. General Directorate of Annual Programs and Conjunctural Evaluations30 Main objective of the MTP is to provide a transition of the economy for a sustainable growth period again, In this perspective, public sector has crucial role in reducing the effects of global crisis on economy,  The short term ones focus on increasing consumption expenditures and eliminating bottlenecks in credit system,  While the medium term ones concentrate on permanent increase in production, investment, employment and export in economy. Macroeconomic Policies and Main Objectives in the MTP (2010-2012) and in the Annual Program 2010

31. General Directorate of Annual Programs and Conjunctural Evaluations31 Following growth process would be realized with the leadership of the private sector  Gradual reduction in public sector borrowing requirement,  Maintaining the price stability, are crucial to increase the available resources and the foresight of private sector in investment and production decisions.

32. General Directorate of Annual Programs and Conjunctural Evaluations32 The recovery of our country from the influence of the global crisis is closely related with the improvements in the world economy. Gradual and uneven recovery in the world economy is expected, Targets in the program are determined by taking also forecasts about foreign economic conjuncture. In many countries especially in the developed ones, rises in the unemployment rates are estimated to continue also in 2010. Due to weak demand and employment conditions, global inflation is estimated to maintain at low levels also in 2010. Constraints

33. General Directorate of Annual Programs and Conjunctural Evaluations33 Macroeconomic Indicators in MTP SECTORS 2010 (2) 2011 (2) 2012 (2) GDP Growth Rates 3,54,05,0 GDP (At Current Prices, Billions of Dollar) 641669723 PER CAPITA GDP (At Current Prices, Dollar) 8.8219.0969.732 CPI (End of Year, % Change) 5,34,94,8 (1) Estimate, (2) Program.

34. General Directorate of Annual Programs and Conjunctural Evaluations34 201020112012 EXPORT (FOB)107.500118.000130.000 IMPORTS (FOB)153.000168.000187.000 FOREIGN TRADE B.-45.500-50.000-57.000 TOURISM REVENUES22.50023.50024.500 CURRENT ACCOUNT BALANCE (CA) -18.000-22.000-28.000 CA/GDP-2,8-3,3-3,9 (Millions of Dollar) Current Account Balance

35. General Directorate of Annual Programs and Conjunctural Evaluations35 Central Govern. Budget Deficit / GDP (%)

36. General Directorate of Annual Programs and Conjunctural Evaluations36 Public Sector Primary Surplus / GDP (%)

37. General Directorate of Annual Programs and Conjunctural Evaluations37 Public Sector Debt Stock (*) / GDP (*) EU Definition

38. General Directorate of Annual Programs and Conjunctural Evaluations38 Unemployment Rates (%)

39. General Directorate of Annual Programs and Conjunctural Evaluations39 Fiscal rules will be implemented.  A new governance model in SEEs will be implemented.  In the financing of investments, the use of public-private collaboration models will be expanded.  Health services and expenditures will be made efficient.  Appropriateness and efficiency in social aids will be achieved.  Agricultural supports will be rearranged. Structural Reforms in the MTP and in the Annual Program 2010

40. General Directorate of Annual Programs and Conjunctural Evaluations40  Tax reform will be finalized.  Arrangements will be made for the local governments to increase their own revenues and improve their financial management.  Training the man power will be accelerated in the nature that the business world demands.  Forms of flexible employment will be expanded.  Development agencies, of which organization process completed, will be put into operation.  State aids will be made more transparent and efficient.  The efficiency of Credit Guarantee Fund will be increased.