1. Economic Stability: Turkey’s Anchors and Beyond April 24, 2008 İbrahim H. ÇANAKCI Undersecretary of Treasury

2. 2 Global Environment Slowdown in Global Growth Rising Commodity Prices Shrinking Capital Inflows

3. 3 Risks Monetary and financial Conditions Emerging market risks Credit risks Market and liquidity risks Macroeconomic risks Risk appetite Closer to center signifies less risk or tighter conditions October 2007 GFSR April 2008 GFSR With Further Downside Risks... Source: IMF

4. 4 4 Turkey’s International Integration–Trade Source: TURKSAT

5. 5 Turkey’s International Integration – FDI Inflows Source: Central Bank of Turkey

6. 6 Turkey’s International Integration–FDI Outflows Source: Central Bank of Turkey

7. 7 Turkey’s International Integration– Government Securities Market Source: Undersecretariat of Treasury

8. 8 Turkey’s International Integration- Stock Exchange Market Source: Central Registry Agency

9. 9 Source: Undersecretariat of Treasury Turkey’s International Integration – Credit Markets

10. 10 (*) Estimate Source: Institute of International Finance, “Global Economic and Capital Markets Forecasts”, March 6, 2008 Net Private Capital Flows to Emerging Market Economies (Billion USD)

11. 11 Source: IMF Brent Crude Oil Prices (USD per barrel)

12. 12 Source: IMF *Consists of grain, oil, flour, meat, sea food, sugar, banana and orange. Index of Food Prices*

13. 13 Short Term Macroeconomic Outlook for Turkey Growth... sub-trend economic growth Inflation... challenges on disinflationary efforts Current Account Balance... pressure on CAB due to rising commodity prices

14. 14 Turkey’s Strengths Supporting Positive Medium Term Outlook  REMARKABLE DECLINE IN PUBLIC DEBT BURDEN  MORE RESILIENT PUBLIC DEBT COMPOSITION  COMFORTABLE FINANCING POSITION OF TREASURY  STRONG RESERVE POSITION OF TREASURY AND CBRT  SUBSTANTIAL DECLINE IN NET EXTERNAL DEBT TO GDP RATIO  STRONG FINANCIAL SECTOR

15. 15 Gross Public Debt Stock (EU Definition, % of GDP) EU-27 average Source: Undersecretariat of Treasury

16. 16 Public Sector Net Debt Stock (% of GDP) Source: Undersecretariat of Treasury

17. 17 Composition of Gross Public Debt (%) Source: Undersecretariat of Treasury

18. 18 Domestic Debt Stock / M2Y (%) Source: Undersecretariat of Treasury, Central Bank of Turkey

19. 19 Total Domestic Debt Rollover Ratio Source: Central Registry Agency

20. 20 Treasury Reserves / Average Monthly Debt Service (%) Source: Undersecretariat of Treasury

21. 21 Central Bank’s Gross FX Reserves (Billion USD) Source: Central Bank of Turkey

22. 22 Turkey’s Net External Debt (% of GDP) Source: Undersecretariat of Treasury

23. 23 Capital Adequacy Ratio (%) FX Position (Million USD) (%) Loans to Assets (%) Asset Quality Banking Sector Indicators

24. 24 Key Priorities Preserving Macroeconomic and Financial Stability Controlling Current Account Deficit and Ensuring A Sustainable External Financing Position

25. 25 Macroeconomic Policies Monetary Policy... aiming at price stability Fiscal Policy... sustaining the fiscal prudence

26. 26 Structural Reform Priorities  Labor Market Reform  Energy Sector Reforms  Continuing with Privatization Program  Further Strenghtening of Revenue Administration and Reducing Informality  Commercial Code

27. 27 Policy Anchors for Turkey IMF EU A Credible and Consistent Policy Framework  Ownership  Commitment  Institutionalization