ECONOMIC OUTLOOK APRIL 2013 Economic Outlook is revized in the 1st and the 3rd weeks of the month. Recent Update: 26/04/2013

OUTLINE A- MACROECONOMIC OUTLOOK B- FOREIGN TRADE OUTLOOK 1) MERCHANDISE 2) SERVICES C- INVESTMENTS , FOREIGN CAPITAL and INCENTIVES D- FREE ZONES in TURKEY E- BILATERAL, REGIONAL, PLURILATERAL and MULTILATERAL TRADE April 2013 Ministry of Economy

A- MACROECONOMIC OUTLOOK April 2013 Ministry of Economy

Growth Forecasts for Selected Countries/Country Groups (%) Source: IMF, OECD, UN, WB According to the IMF, Turkish Economy is expected to grow by 3.4% and 3.7% in 2013 and 2014 respectively. In the 2012, Turkish economy grew by 2.2%. April 2013 Ministry of Economy

Forecasts for Merchandise and Services Trade Growth (%) Source: IMF and WTO According to the IMF estimates, global trade of merchandise and services is expected to increase by 3.5% in 2013 and 5.3% in 2014 in real terms. According to the WTO estimates, global trade volume of merchandise and services is expected to increase by 3.3% in 2013 and 5.0% in 2014 in real terms. April 2013 Ministry of Economy

Economic Targets of 2013-2015 Medium Term Programme *Forecast (Medium Term Programme, Ministry of Development – October 9, 2012) Medium Term Programme which covers 2013-2015 period aims to strengthen macroeconomic and financial stability by reaching potential economic growth rate, decreasing the current account deficit further, reducing inflation and improving public fiscal balances. April 2013 Ministry of Economy

Real GDP Growth of Selected Countries/Country Groups (2012) Euro Area Source: TURKSTAT, IMF, EuroStat, IBGE, Turkish Economy expanded by 2.2% in 2012. April 2013 Ministry of Economy

Annual Economic Growth Rates (2002-2012) * Forecast, Medium Term Programme Source:TURKSTAT Turkey has recovered fast from the global financial crisis and amongst those countries affected less from current global economic uncertainties. Mean annual growth rate between 2002 and 2012 was 5.2%. Real GDP growth for 2012 realized as 2.2%. April 2013 Ministry of Economy

GDP Per Capita Source: Dollar value is from TURKSTAT, PPP GNI value from World Bank Since 2002 GDP per capita has tripled from 3,492 USD to 10,504 USD. According to Purchasing Power Parity (PPP, current international $), GNI per capita surpassed 17 thousand international dollar which has the same purchasing power over GNI as a U.S. dollar has in the United States. April 2013 Ministry of Economy

Capacity Utilization Ratio (%) Source: TURKSTAT Capacity utilization ratio realized as 73.6 % in April 2013. April 2013 Ministry of Economy

Industrial Production Index Source: TURKSTAT Industrial production index increased by 1.59 % year-over-year in February 2013 up to 104.5 (2010=100). April 2013 Ministry of Economy

Inflation (Annual Percent Change) Source: TURKSTAT Annual inflation in 2012 realized as 6.16%. Inflation was 7.29% in March 2013. April 2013 Ministry of Economy

Real Effective Foreign Exchange Rate (2003=100)   Source: CBRT As of March 2013, Turkish Lira has appreciated by 0.23% and 0.57% monthly in terms of the CPI-based and PPI- based eal effective exchange rate respectively. April 2013 Ministry of Economy

Total Credits and Consumer Credits (Billion TL)   Source: BRSA Credits and specifically consumer credits increased in parallel to the growing domestic demand. Total credits increased %3.21 on a monthly basis in March 2013. April 2013 Ministry of Economy

CDS Premiums (Apr. 25th, 2013) Source: DB Research * Higher CDS premiums indicate higher risk levels. CDS premium of Turkey is significantly low compared to most of the European countries. April 2013 Ministry of Economy

Financial Markets   Source: BRSA Comparing to previous year, total assets of the banking sector increased by 14.41% and reached 1.397 trillion TL in February 2013. Capital Adequacy Ratio of Turkish Banking Sector is 17.63% in February 2013. April 2013 Ministry of Economy

EU Defined Budget Deficit/ GDP (%) * 2011 EU defined general government budget deficit/GDP ratio was 2.6% in Turkey in 2011 and Turkey satisfied the Maastricht criteria of 3%. Turkey also outperformed 18 EU Countries. Central government budget deficit/GDP ratio was 2.0% in Turkey in 2012. In January-March 2013 period, central government budget deficit was 897 million Turkish Liras. April 2013 Ministry of Economy

Government Debt / GDP (%) Debt/GDP ratio of Turkey was 36.1% in 2012, which was below the level in 24 EU Countries and the Maastricht Criteria (60%). April 2013 Ministry of Economy

Unemployment Rates (%) Source: TURKSTAT In January 2013, the unemployment rate was 10.6%. Seasonally adjusted unemployment rate was 9.4%. Seasonally adjusted unemployment rate in Euro Area was 12.0% and 10.9% in (EU27) in February 2013. In terms of unemployment ratio Turkey outperformed 15 EU countries according to current data. After Russia, Germany, England and France, Turkey has the 5th largest labor force among the European countries. (2011, World Bank) April 2013 Ministry of Economy

Potential of Population (2011) Source: World Bank (2011), TURKSTAT (2012) Turkey has a population of 75.6 million in which half of the population is under the age of 30.1. Growth rate of population is 1.2% in Turkey, 0.3% in EU Countries and -0.1% in Germany. April 2013 Ministry of Economy

Growing Dynamism in Turkey's Domestic Market Cell phone penetration rate in households: 93.2% (2012) Internet access rate in households: 47.2% (2012) Internet access rate in enterprises: 92.5% (2012) PC penetration rate in households: 31.8% (2012) Laptop penetration rate in households: 27.1% (2012) Digital camera penetration rate in households: 27.1% (2012) Printer penetration rate in households: 14.0% (2011) 1 of each 5 people owns a vehicle. (2011) April 2013 Ministry of Economy

B- FOREIGN TRADE OUTLOOK April 2013 Ministry of Economy

I) MERCHANDISE April 2013 Ministry of Economy

Targets in Merchandise Trade * Actual (Source: TURKSTAT) **Forecast: Medium Term Programme, Ministry of Development- 10/09/2012) April 2013 Ministry of Economy

Turkey's Share in Global Merchandise Exports (%) Source: WTO Turkey’s share in global merchandise exports was %0.83 in 2012. April 2013 Ministry of Economy

Foreign Trade Volume/GDP (%) The ratio of foreign trade volume/GDP was 49.5% in 2012. Turkey’s integration to the international trade system is eminent. April 2013 Ministry of Economy

Foreign Trade Developments 2011 - 2012 / January-February 2012 - 2013 * Energy corresponds to Chapter 27. Source: Ministry of Economy In January-February period 2013 compared to same period of 2012, exports increased by 8.3% and imports increased by 8.3% respectively. April 2013 Ministry of Economy

Monthly Exports/Imports In Febuary 2013 compared to same period of 2012 exports have increased by 5.8% and reached to the level of 12.4 billion dollar and imports have increased by 9% up to the level of 19.4 billion dollar. April 2013 Ministry of Economy

Distribution of Foreign Trade in Broad Economic Categories EXPORT IMPORT April 2013 Ministry of Economy

Main Export Items April 2013 Ministry of Economy * Percent change is related to the annual change in exports in 2013. Source: TURKSTAT April 2013 Ministry of Economy

Main Import Items April 2013 Ministry of Economy * Percent change is related to the annual change in imports in 2013 Source: TURKSTAT April 2013 Ministry of Economy

Main Trade Partners (January-February 2013) Main Export Partners (Share,%) Main Import Partners (Share,%) Source: TURKSTAT April 2013 Ministry of Economy

Exports by Regions Source: TURKSTAT April 2013 Ministry of Economy

Imports by Regions Source: TURKSTAT April 2013 Ministry of Economy

Tariff Rates April 2013 Ministry of Economy Source: WTO Tariff Profiles, 2012 April 2013 Ministry of Economy

2) SERVICES April 2013 Ministry of Economy

Targets in Services Tourism: Besides increasing the number of tourist arrivals, creating a structure that improves service quality, targets high-income groups by diversifying marketing channels, preserves natural capital and sustainability, and stimulates those types of tourism where Turkey has comparative advantages Construction, Engineering-Architecture, Technical Consultancy and Contracting Services: Establishing a structure that fits Turkey’s economic and social needs, that is compatible with high technology and international rules, that is sensitive to environment, that creates high value added, high foreign exchange inflow and high employment, that grants high service quality, and that relies on qualified human and physical capital. Commercial Services: Increasing productivity and commercial trade volume in a competitive way, and to encourage technology and innovation. April 2013 Ministry of Economy

Turkey's Share in Global Services Exports (%) Source: WTO, CBRT Turkey’s share in global exports of services was 0.97% in 2012. April 2013 Ministry of Economy

Balance of Payments - Services *January-February Source: CBRT April 2013 Ministry of Economy

Tourism Statistics (Quarterly) Tourists visited, Source: TURKSTAT Turkey ranks as the 6th in the world and the 4th in Europe among the most favourite tourism destinations. Turkey’s income per tourist increased by 1% in 2011 and remained the same in 2012. April 2013 Ministry of Economy

Contracting Services Abroad Contributions to the overall economic performance: Creating foreign exchange inflow, exports, employment, technology transfer; adding to the machinery stock, facilitating internationalization 31 out of the world’s top 225 contracting companies are Turkish. Turkey ranks as the 2nd country (following China) in terms of the number of top contracting companies. April 2013 Ministry of Economy

Logistics (2012) Europe’s biggest truck fleet (45 thousands trucks and 1,420 companies) Almost 1.1 million flights in 2012 (2.4 million tonnes freight and 130 million passengers) 25. biggest fleet in the world 48 airports and 76 ports Total length of divided highways will reach 15 thousand kilometers. High-speed railway projects are carried out rapidly. 2.080 km. otoyol, 31.395 km. devlet yolları, 31.390 km. il yolları ağı olmak üzere toplam 64.865 km. yol ağı (1/1/2011) 2011 Ocak-Eylül: %14,1 artış ve 798.723 uçuş ile 1,7 milyon ton yük ve 91,2 milyon kişi taşınmıştır. (Devlet Hava Meydanları İşletmesi) Dünyadaki 25. büyük filo (2008 Ağustos, Denizcilik Müsteşarlığı) 45 Havaalanı ve 51 liman Avrupa’nın En Büyük Kamyon Filosu (45 bin adet kamyon ve 1.420 şirket) April 2013 Ministry of Economy

Energy Turkey is an energy hub between energy producer and consumer regions April 2013 Ministry of Economy

C- INVESTMENTS, FOREIGN CAPITAL and INCENTIVES April 2013 Ministry of Economy

Investment Climate in Turkey April 2013 Ministry of Economy

Time Required to Start a Business Source: Invest In Turkey The required time to start a business is 6 days in Turkey. April 2013 Ministry of Economy

Skilled Labour Availability Source: Invest In Turkey Scoring is between 0 and 10. April 2013 Ministry of Economy

Finance Skills Scoring is between 0 and 10. Source: Invest In Turkey Scoring is between 0 and 10. April 2013 Ministry of Economy

The Sectoral Breakdown of Foreign Investments * January-February Source: CBRT January- February 2013 April 2013 Ministry of Economy

Breakdown of Foreign Investments by Country * January-February Source: CBRT April 2013 Ministry of Economy

Investment Incentive System The current investment incentive system of Turkey is structured in four sub systems: General Investment Incentive System Regional Investment Incentive System Investment Incentive System for Big Scale Projects Encouraging the Strategic Investments April 2013 Ministry of Economy

Investment Incentives (January-March) Source: General Directorate of Incentive Implementation and Foreign Investment April 2013 Ministry of Economy

D - FREE ZONES IN TURKEY April 2013 Ministry of Economy

The Advantages of Free Zones for Users Tax advantages for manufacturers Medium-and long-term investment view Availability to transfer profits Commercial facilities Exemptiın from customs duties Acquisition of the documents relating to the free movement of goods under the scope of Customs Union with the EU Principle of equality No time restrictions Flexibility to adjust to the market needs and conditions Reliable inflation accounting Market access to domestic and foreign markets Reduced bureaucratic procedures and dynamic business management Strategic advantages. Affordable and compatible infrastructure Supply chain opportunities April 2013 Ministry of Economy

Free Zones in Turkey 55,938 people have been employed in Free Zones of Turkey in 2012. April 2013 Ministry of Economy

Trade Flows of Free Zones Source: General Directorate of Free Zones, Foreign Investments and Services In 2012 total trade volume of the Free Zones reached to 23.1 billion dollars, increasing 1.8% annually. April 2013 Ministry of Economy

Concentration in Free Zones by Industries Source: General Directorate of Free Zones, Foreign Investments and Services April 2013 Ministry of Economy

E - BILATERAL, REGIONAL, PLURILATERAL and MULTILATERAL TRADE April 2013 Ministry of Economy

Trade Relationships of Turkey with Others Bilateral Trade Relationships of Turkey Europe, Asia-Pacific, Eurasia, Middle East and North Africa, Sub-Saharan Africa, Americas Regional and Multiple Trade Relationships of Turkey EU, ECO, D8, BSEC, OIC, COMCEC Multilateral Trade Relationships of Turkey WTO, OECD, ACTA April 2013 Ministry of Economy

Regional Breakdown of Exports Source: TURKSTAT * January-February ** Except Lebanon,Mauritius and Korea In January-February period of 2013, our exports to EFTA countries decreased by 61.3% and our exports to FTA countries decreased by 13.6% annually. The annual increase of our exports to Turk Republics in the same period was 29.9% and Turk Republics became the fastest growing export destination of the regions above. April 2013 Ministry of Economy

Chronological Evolution of the Relationship between Turkey and the EU 12 September 1963: Ankara Agreement 13 November 1970: The signing of the Additional Protocol 1 January 1973: Additional Protocol to come into force 14 April 1987: Turkey’s Application for Membership 5 March 1995: The Association Council Decision Establishing the Customs Union 10-11 December 1999: Recognition of the Candidate Status of Turkey at the Helsinki Summit 8 March 2001: The first Accession Partnership Document issued 17 December 2004: European Council decision to start Negotiations with Turkey in Brussels Summit 3 October 2005: Start of the Negotiations between Turkey and the EU 20 October 2005: Start of the Screening Process 13 October 2006: End of the Screening Process April 2013 Ministry of Economy

The process of Accession Negotiations between Turkey and the EU Negotiations for 1 chapter were temporarily opened and closed afterwards. Science and Research Negotiations for 12 chapter were opened but closure criteria to all those negotiations were imposed bt the EU. Business and Industry Policy, Statistics, Financial Control, Consumer and Health Protection, Trans-European Networks, Intellectual Property Law, Company Law, Free Movement of Capital, Information Society and Media, Taxation, Environment, Food Safety, Veterinary and Plant Health Position papers of Turkey for 2 negotiations were forwarded to the EU. EU Common Position Paper is expected to be announced. Education and Culture, Economic and Monetary Policy For the opening of 8 chapters opening criterias of the EU have to be met by Turkey. In all other chapters, Screening Reports are expected to be announced by the EU. April 2013 Ministry of Economy

Trade between Turkey and the EU *January-February Source: Data Source of the Ministry of Economy April 2013 Ministry of Economy

FTA Countries Egypt EFTA (Norway, Switzerland, Iceland, Liechtenstein) Albania Georgia Montenegro Serbia Chile Jordan Lebanon* Mauritius*** South Korea**** (*) Agreements that are in the approval process (**) Pending (***) Will enter into force on 1st June 2013 (****) Will enter into force on 1st May 2013 EFTA (Norway, Switzerland, Iceland, Liechtenstein) Israel Macedonia Croatia Bosnia and Herzegovina Palestine Tunisia Morocco Syria (**) April 2013 Ministry of Economy

Trade with FTA Countries Our exports to FTA Countries increased %7.2 in 2012. The share of FTA Countries in total exports reached %9.6. Turkey recorded a trade surplus of 3.9 billion USD in 2012 with FTA Countries, while there was a trade deficit of 1.5 billion USD in 2002. April 2013 Ministry of Economy

Trade Representatives Abroad 208 trade representatives from the Ministry are serving in 105 locations and 8 offices abroad. April 2013 Ministry of Economy

Locations of Trade Representatives AMERİKA Buenos Aires Karakas Mexico City Ottava Santiago Vaşington Houston Los Angeles New York Sao Paulo Şikago Toronto Miami San Francisco Seattle AFRİKA Abuja Addis Ababa Akra Cezayir Dakar Darüsselam Hartum İskenderiye Kahire Nairobi Pretoria Rabat Trablus Tunus Kazablanka ASYA Astana Aşkabat Bangkok Bişkek Cakarta Duşanbe Hanoi İslamabad Kabil Kuala Lumpur Manila Pekin Seul Singapur Taşkent Tokyo Ulan Bator Yeni Delhi Almatı Guangzhou Hong Kong Karaçi Mumbai Şangay Georgetown GEORGETOWN AVRUPA/KAFKASYA AB DTÖ OECD Atina Bakü Belgrad Berlin Bern Bratislava Brüksel Budapeşte Bükreş Dublin Helsinki Kiev Kişinev Kopenhag Lahey Lizbon Lefkoşa Londra Lubliyana Madrid Minsk Moskova Oslo Paris Podgorica Prag Priştine Roma Saraybosna Sofya Stokholm Tiflis Tiran Üsküp Varşova Viyana Zagreb Barselona Batum Düsseldorf Hamburg Hannover Kazan Marsilya Milano Münih Novorossisk Odessa Rotterdam Selanik St. Petersburg Stutgart Birmingham Krasnodar Novosibirsk Yekaterinburg ORTA DOĞU Abu Dhabi Amman Bağdat Beyrut Doha Kuveyt Manama Muskat Riyad Sana Şam Tahran Tel Aviv Basra Cidde Dubai Erbil Halep Kudüs Musul Tebriz Daimi Temsilci Yardımcılığı AVUSTRALYA Ticaret Müşavirliği Sidney Melbourne Ticaret Ataşeliği İrtibat Büroları April 2013 Ministry of Economy

Projects with Future Prospects Export Oriented Production Strategy and Input Supply Strategy Market Access Strategy Supporting Exports Trade Remedies Restructuring the Incentive System Improving the Investment Climate Trade Agreements Next-Generation Free Zones Trade in Services and Turkish Investments Abroad Market Surveillance and Inspection Strengthening the Organization Abroad April 2013 Ministry of Economy