MEDIUM TERM PROGRAM

(2017-2019)

October 4th, 2016

Outline

1. World Economy

2. Main Objectives & Growth Strategy of Medium Term

Program

3. Medium Term Program (2017-2019) Main

Macroeconomic Aggregates
WORLD ECONOMY

3
Global Growth (%)

Global growth is below pre-crisis levels.

5
4.8

3.5
3.2

2
2002-2007 2008-2015 2016-2019
Average Average Average

Source: IMF World Economic Outlook Report

4
World Trade Volume Growth (%)

World trade volume growth lost momentum after global crisis.

9

8 7.6

4 3.8
3.1
3

2
2002-2007 2008-2015 2016-2019
Average Average Average

Source: IMF World Economic Outlook Report

5
5
Emerging Economies Growth Excluding China and India (%)

6
5.7

4
3.4 3,0

2
2002-2007 2008-2015 2016-2019
Average Average Average

Source: IMF World Economic Outlook Report

6
 Euro Area Growth

(%) Growth in Euro Area is moderate.

5
4 3.2 3.1
3
2.1
2 1.7 1.6 1.6 1.5 1.6 1.6 1.6
0.9
1 0.5
0
-1 -0.3
-0.9
-2
-3
-4 -4.5
-5
2007
2005

2006

2008

2009

2010

2011

2012

2013

2014

2015

2016 F

2017 F

2018 F

2019 F
F: Forecast

Source: IMF World Economic Outlook Report

7
Kaynak: IMF Küresel Ekonomik Görünüm Raporu 7
MEDIUM TERM PROGRAM

8
Main Objectives of Medium Term Program

 Increasing stable and inclusive growth

 Reducing inflation

 Preserving decreasing trend in the current account deficit

 Increasing competitiveness, employment and productivity

 Improving quality of the fiscal discipline and strengthening

public finance

9
Growth Strategy in the Program Period

 Improving human capital

 Improving efficiency in labor market

 Increasing technological development and innovation capacity

 Strengthening infrastructure

 Enhancing institutional quality

10
MEDIUM TERM PROGRAM
2017-2019
MAIN MACROECONOMIC
AGGREGATES

11
GDP Growth (%)

5.0 5.0
5

4.4

4.0
4

3.2

2
2015 2016 F 2017 P 2018 P 2019 P

F: Forecast
P: Program 12
Inflation Rate (%)

10

9 8.8

8
7.5

7
6.5

5.0 5.0
5

3
2015 2016 F 2017 P 2018 P 2019 P

F: Forecast
P: Program 13
Current Account Deficit (% GDP)

5.0

4.5
4.5
4.3
4.2

4.0 3.9

3.5
3.5

3.0

2.5
2015 2016 F 2017 P 2018 P 2019 P

F: Forecast
P: Program 14
Unemployment Rate (%)

10.8

10.6
10.5

10.4
10.3
10.2
10.2
10.1

10.0
9.8
9.8

9.6

9.4

9.2
2015 2016 F 2017 P 2018 P 2019 P

F: Forecast
P: Program 15
Central Government Budget Deficit (% GDP)

2.0
1.9

1.8

1.6 1.6
1.6

1.4
1.3
1.2
1.2

1.0

0.8

0.6
2015 2016 F 2017 P 2018 P 2019 P

F: Forecast
P: Program 16
EU Defined Public Debt (% GDP)

35

32.9 32.8
33

31.9

31.0
31

29.9

29

27
2015 2016 F 2017 P 2018 P 2019 P

F: Forecast
P: Program 17
Major Reforms in 2017-19: Regulations and
Implementations

 Implementation of 25 Primary Transformation Program which was

previously disclosed to the public, will be effectively conducted and

monitored.

 Additionally major regulations and implementations in 2017-19 are;

18
Major Reforms in 2017-19: Regulations and
Implementations-I
 Alternative dispute resolution mechanisms for labor disputes will be
incorporated in our legal system

 Reconstructing the system of notary and expert witness mechanism

 Measures will be taken to shorten trial length

 Specialized courts especially on financial and IT sectors will be

established

 The settlement mechanism will be established for the decision of

Turkish Competition Authority

 Increasing the Social Security Premium support for firms depending on

export performance

19
Major Reforms in 2017-19: Regulations and
Implementations-II
 The Law for İstanbul International Financial Center will be enacted.

 In order to reduce red tape in starting new business for SMEs’, required
regulations will be introduced.

 The Law for Allowing Moveable Properties as Collateral will be released.

 New Tax Procedures Code and New Income Tax Code will be legislated.

 Apprenticeship training will be evaluated in the context of compulsory

education.

 Economy’s production potential and quality will be raised by enhancing

vocational and technical education reforms.

20
Major Reforms in 2017-19: Regulations and
Implementations-III
 Patent Law will be implemented.

 Programs for supporting domestic production through public procurement

will be put into practice.

 Programs for increasing domestic production in healthcare industries will

be implemented.

 Turkey Space Agency will be established.

21
Major Reforms in 2017-19: Regulations and
Implementations-IV

 Programs for promoting practices that improve energy efficiency will be

launched.

 Broadband infrastructure will be expanded.

 In education system that is major factor for long term growth; some
regulations such as abolition of double shift schooling, making preschool
education mandatory, increasing the share of private sector in education and
replacing the 5th class with prep class for foreign language education will be
implemented.

22
 2017-2019
MACROECONOMIC AGGREGATES
&
BUDGET BALANCE

23
 Growth and Inflation

2015 2016F 2017P 2018P 2019P

GDP Growth (%) 4.0 3.2 4.4 5.0 5.0

GDP (Billion TL) 1,953 2,148 2,404 2,686 2,987

GDP per Capita ($) 9,257 9,243 9,529 10,164 10,926

CPI (end year, % change) 8.8 7.5 6.5 5.0 5.0

F: Forecast
P: Program 24
 Balance of Payments
($ billion)

2015 2016F 2017P 2018P 2019P

Export (Fob) 143.8 143.1 153.3 170.0 193.1

Import (Cif) 207.2 198.0 214.0 236.9 261.8

Foreign Trade Balance -63.4 -54.9 -60.7 -66.9 -68.7

Travel Receipts 26.6 18.6 23.5 27.0 27.7

Current Account Balance -32.2 -31.3 -32.0 -31.7 -31.2

Current Account Balance

-4.5 -4.3 -4.2 -3.9 -3.5
(% of GDP)

F: Forecast
P: Program 25
 Labor Market

2015 2016F 2017P 2018P 2019P

Employment (thousand) 26,621 27,216 27,948 28,741 29,534

Non-Farm Employment (thousand) 21,138 21,961 22,755 23,655 24,570

Employment Rate (%) 46.0 46.3 46.9 47.6 48.3

Labor Force Participation Rate (%) 51.3 51.8 52.3 52.9 53.5

Unemployment Rate (%) 10.3 10.5 10.2 10.1 9.8

F: Forecast
P: Program 26
 Central Government Budget

(billion TL)

2015 2016F 2017P 2018P 2019P

Total Expenditures 506.3 581.1 645.1 694.6 750.6

Primary Expenditures 453.3 529.6 587.6 632.6 678.1

Interest Payments 53.0 51.5 57.5 62.0 72.5

Total Revenues 482.8 546.5 598.3 650.3 710.5

Tax Revenues 407.8 450.0 511.1 567.0 624.2

Non-Tax Revenues 75.0 96.5 87.2 83.2 86.3

Budget Balance -23.5 -34.6 -46.9 -44.3 -40.1

F: Forecast
P: Program 27
 Public Finance

(% of GDP)

2015 2016F 2017P 2018P 2019P

Public Sector Borrowing Requirement 0.0 1.7 1.5 1.4 0.9

Central Government Budget 1.2 1.6 1.9 1.6 1.3

Rest of the Public Sector -1.2 0.1 -0.5 -0.2 -0.5

Public Sector Primary Balance (*) 0.7 -1.2 -0.6 0.0 0.9

Central Government Budget 0.4 -0.9 -0.6 0.0 0.6

Rest of the Public Sector 0.3 -0.2 0.0 -0.1 0.2

(*) Program Defined

F: Forecast
P: Program 28