Turkey Economic Outlook Snapshot of Macro Economic Indicators and Near Future. Mustafa Mente, Secretary General November 20, 2015

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1 Turkey Economic Outlook Snapshot of Macro Economic Indicators and Near Future Mustafa Mente, Secretary General November 20, 2015

Foreign Economic Relations Board of Turkey (DEIK) 1 Main Indicators # Business Councils 130 # Members +1000 # Founding Institutions 102 # Domestic Represenatives 148 10 years CAGR of #Activities %13

4 Foreign Economic Relations Board of Turkey (DEIK) 1 Main Indicators # Business Councils 130 # Members # Founding Institutions 102 # Domestic Represenatives years CAGR of #Activities %13 Agro & Food Banking & Finance Other Global Investors Member Profile Construction & Infrastrucutre Tourism, Health, Logistics DEİK is the largest networking institution of Turkish private sector 1/3 of the annual average of 750 events and activities are held in abroad including the official visits of Presidency and Prime Ministry of Turkish Republic DEIK is responsible for leading foreign economic relations of Turkish private sector in a myriad of sectors particularly foreign trade, international investment and services, international construction activities and logistics, exploring inward and outward investment opportunities as well as increasing the export volume of Turkish business and coordinating similar business development activities. Copyright 2015 by DEIK. All rights reserved. 3

Turkey showed an impressive performance in recent years 1

(USD) GDP Total (Bn USD) Population Millions Trade Volume

400 2,906 195 25% 18% 101 2 2001 2014 2001 2014 Total 2014

Turkey's GDP is 17th in the world and has the 2nd largest

5 Turkey showed an impressive performance in recent years 1 Economic & Business Indicators of Turkey GDP Per Capita (USD) GDP Total (Bn USD) Population Millions Trade Volume (Bn USD Current) FDI Inflows (Bn USD) M 12 10, , % 18% Total 2014 Young Population Share Avg Avg Turkey's GDP is 17th in the world and has the 2nd largest population of Eurozone Copyright 2015 by DEIK. All rights reserved. 4

A positive economic outlook for Turkey 1 Growth to pick up There is a significant rise in the "middle and upper-middle class" in parallel to the GDP growth urbanization Relatively successfull receory

6 A positive economic outlook for Turkey 1 Growth to pick up There is a significant rise in the "middle and upper-middle class" in parallel to the GDP growth urbanization Relatively successfull receory from economic crisis compare to Eurozone Unemployment recovery was relatively successful after global crisis to peer OECD and Eurozone countires; unemployment rate to decrease from 14% in 2009 down to 9-10% in 2014 Inflation and Public Dept to bottom out Have been stabilizing in the range of 5-10% since 2004 Turkey has a relatively low debt-to-gdp ratio among EU countries yet under-rated by rating agencies Current account deficit remained as a problem but recent developments were positive The global financial distress had been weathered better than expected and the concerns surrounding debt service capacity have dissipated. Expectation is a sovereign rating increase Worldwide Rankings GDP Population OECD+EU Doing Business Index¹ Investment Index² Logistics Index¹ Retail Index² Source: 1. World Bank, 2. AT Kearney Copyright 2015 by DEIK. All rights reserved. 5

8 EU hold the lion share both for invesments and exports of Turkey with a descending trend 2 Foreign Direct Investments Inflow Exports 2014 Share of EU 75% 2014 Share of EU 44% % % 39% % % % 79% % 46% 48% % % % % 57% Germany Netherland UK Other Europe Rest of World FDI Inflow (Mn $) Exports (Bn $) Non-EU MENA Asia European Union Rest of World Services & Industrial Sectors equally generated %70 of FDI flows while Financial Activities was %28 in last 5 years. Annual average Real Estate activity is ~2.9 Bn USD Copyright 2015 by DEIK. All rights reserved. 7

Turkey s economic performance is strictly correlated with economic growth of EU-Zone 2 Economic Growth Market

in Exports 53 % % MENA in Exports 17 % 5 2008-2010 -0.7% 47 % 25 % EU MENA 2011-2014 -0.

According to OECD Calculations -5 Econmic Crisis Source: World Bank 1.

10 Turkey s economic performance is strictly correlated with economic growth of EU-Zone 2 Economic Growth Market Responses of Turkey Economic Growth % 10 Sub-Saharan Africa Turkey EU Domestic Demand Growth 2,56 % % EU in Exports 53 % % MENA in Exports 17 % % 47 % 25 % EU MENA % 43% 30 % Expected¹ 1.65% Source: 1. According to OECD Calculations -5 Econmic Crisis Source: World Bank 1. According to OECD Calculations Due to market diversification and Eurozone stagnation, impact of MENA markets rised after 2008 upsurge on Turkey s exports Copyright 2015 by DEIK. All rights reserved. 9

Turkey-EU Agenda Highlights 3 Customs Union Revision For wider the economic integration between Turkey and the EU and to overcome the obstacles in the functioning of the current Customs Union.

report with Member States, the negotiation stance will be developed and the EU Council will delegate negotiation authority to European Commission so it is reasonable to expect that the negotiations

12 Turkey-EU Agenda Highlights 3 Customs Union Revision For wider the economic integration between Turkey and the EU and to overcome the obstacles in the functioning of the current Customs Union. Turkey s exclusion from new FTAs decisionmaking mechanisms have created negative impacts on Turkey s trade relations Following MoU, EU will start negotiation stance and, after sharing impact analysis report with Member States, the negotiation stance will be developed and the EU Council will delegate negotiation authority to European Commission so it is reasonable to expect that the negotiations Turkey and the EU to start in 2016 Accession Negotiations Opened and Porvisionally Closed 1 Chapter (25.Science and Research) Opened 13 Chapter (+2 Chapter to be Opened) Screening Reports Approved at the Council of the European Union with Benchmarks : 8 Chapters Draft Screening Reports are to be Approved at the Council of the European Union 9 Chapters Free Trade Agreements FTA concluded Chile, Korea, Mexico, South Africa FTA in negotiations ASEAN, Canada, GCC, India, Malaysia, Singapore, Ukraine Association agreements with FTA component Central America regional Association Agreement, Andean Community, Mercosur Transport Quotas Visa Issues TTIP Against basic philosphy of Customs Union Need to be flexed Expected to be discarded in following 3 years Need to be joined from Turkey side Consequences without TR is not desirable Copyright 2015 by DEIK. All rights reserved. 11

Public support for full EU integration picked up recent years, Challanges will determine the roadmap 3 Pessimistic: EU+MENA in Trouble Optimistic: EU End of Stagnation Political upsurge damage

Market diversification may not meet the expectations this time Turkish Economy need net foreign capital and FDI annualy More domesticd base approaches may hold place in the dailiy politics and

13 Public support for full EU integration picked up recent years, Challanges will determine the roadmap 3 Pessimistic: EU+MENA in Trouble Optimistic: EU End of Stagnation Political upsurge damage regional logistics in MENA Continuation of stagnation may strand Turkey Hinder export increase. Market diversification may not meet the expectations this time Turkish Economy need net foreign capital and FDI annualy More domesticd base approaches may hold place in the dailiy politics and economics Resurgence of FDI Flows and Boosting Exports from Turkey Extremely close to CIS, ME and Africa newly emerging markets: Access of the East to EU countries and vice-versa Offers easy access (proximity) to all such nations without the risk Ensures flexibility in all fronts Proximity to EU now better with the customs union: Trade-wise Turkey is integrated into the EU Full EU-integration potential is a reality for Turkey Keep its place more relevant in the political agenda of TR Public support to EU membership progress rose from 43% to 55% in last 5 years in Turkey Copyright 2015 by DEIK. All rights reserved. 12

14 Other issues of Turkey s near future agenda 3 Domestic Agenda Items International Agenda Items Single party Justice Development Party government was elected with Nov 1, 2015 Elections (%50 majority) Continuation of economic reforms as in 2000s Inclusiveness, Investments and Implementation as stated in G20 Antalya Public-Private Partnership Projects (Infrastructure driven) Wages expected to be increased Fiscal Discipline Value-added contributionto current production capacity with assertive projects (Aviation, Defense, Automotive, Techno Start-Ups) Turkey is key partner for fighting with regional radical terrorism and main driver of solving refugee problem in global presence Lifting Sanctions on Iran Turkey is expected to benefit from new opportunities in Iran but also face competition from countries that renew economic and political ties with Iran Actor in regional energy and logistics routes New Silk Road TANAP, Turkish Stream, KRG Oil Keep its place more relevant in the political agenda of TR Potential Partner for Cooperation in Third Countries especially in Sub-Shabaran Africa and MENA OECD economic growth forecast is ~3.5-4 % for Turkey similar to IMF s tripling EU growth forecast in following 3 years Copyright 2015 by DEIK. All rights reserved. 13

Turkey's GDP to reached $1 trillion by 2016 Dış Ekonomik İlişkiler Kurulu (DEİK) River Plaza Büyükdere Caddesi, Bahar Sokak No: 13/9-10, 34394

org www.healthinturkey.com www. studyinturkey.org.tr www.delovayaturtsia.

6552 enacted on 11 September 2014, being further empowered and assuming full responsibility of managing the foreign economic relations of the

15 Turkey's GDP to reached $1 trillion by 2016 Dış Ekonomik İlişkiler Kurulu (DEİK) River Plaza Büyükdere Caddesi, Bahar Sokak No: 13/9-10, Levent/ İstanbul-Türkiye Telefon : Fax : Mail : info@deik.org.tr www. studyinturkey.org.tr DEIK was established with this objective in 1986 and adopted a new structure with the Law No enacted on 11 September 2014, being further empowered and assuming full responsibility of managing the foreign economic relations of the Turkish private sector." As of November 2014, DEIK has 102 founding institutions and 130 business councils, and approximately 900 member companies which form these councils, as well as 2000 representatives from the member companies. Copyright 2015 by DEIK. All rights reserved. 14

Industrial Exports: Opportunities and Challenges

14 th Industrialists Conference Muscat, Sultanate of Oman 30 March 2014 Industrial Exports: Opportunities and Challenges Mustafa Mente Turkish Exporters Assembly Secretary General Agenda 1. Turkish Exporters