The Turkish Economy, State of Play

Dirk Verbeken, DG Economic and Financial Affairs

Brussels, 25 September 2012

Growing at a robust rate…

Source: Turkish Statistical Institute (TUIK)

Turkey Euro Area US Brazil Russia India China2012 2.3 -0.3 2.0 2.5 4.0 6.1 8.02013 3.2 0.7 2.3 4.6 3.9 6.5 8.52012 3.3 -0.1 2.4 3.2 4.5 7.1 8.22013 4.6 0.9 2.6 4.2 4.1 7.7 9.32012 2.9 -0.3 2.1 2.9 3.8 6.6 8.22013 4.0 0.7 2.4 4.2 4.2 6.9 8.62014 5.0 1.4 2.8 3.9 4.0 7.1 8.42012 3.2 -0.3 2.1 3.3 4.4 6.7 8.32013 5.4 0.9 2.3 4.5 4.4 7.2 8.5

Growth Forecasts for Selected Countries/Country Groups (%)

IMF

WB

UN

OECD

…with good prospects…

…a significant income increase…

Compares with Belgium (PPP adjusted) : 37600 (2011)

External vulnerability high…

Inflation sticky

Source: Turkish Statistical Institute (TUIK)

2011 Budget Performance, in % of GDP

Compares with Belgium (April notification) : deficit 3.7% of GDP

Public Debt (2011, % of GDP)

Compares with Belgium (April notification) : debt 98% of GDP

• Turkey has a population of 75 million, and half younger than 29.7.• Growth rate of population is 1.4% in Turkey, compared with 0.3% in the EU.

Population is young…

Unemployment rate…

Employment…

In a nutshell (1)…

• High growth, driven by domestic demand in 2010-2011.• Major deceleration in 2012H1 (3.1% yoy), rebalancing

away from credit fuelled consumption…• Some improvement in trade/current account deficit, but

major domestic savings shortage remains (capital reversals' risk)

In a nutshell (2)…

• Public finances relatively sound, fiscal stance broadly ok• Monetary policy complex and multi-targeted (growth,

CA, inflation)• Inflationary pressures significant • Improvements on the labour market, but low female

participation• Education and human capital major challenges

In a nutshell (3)…

• Structural reforms very high on the agenda after 2001 financial crisis (financial sector, public sector, business climate: FDI-law, banking law, etc…)

• But major slowdown in recent years…• Imbalances signal competitiveness problems and call

for more…