Download Macro Trends in Turkish and Global Economy

Bakış
Macro Trends in Turkish and
Global Economy
Issue 5
January 2017
kpmg.com.tr
The 19 gazelle varieties can be split into two species. The slight physical variations
between gazelle types are determined by habitat. Both species of gazelle, a subspecies
of antelopes, are tawny in color with brown and white markings and both have
permanent horns. A gazelle can outrun a cheetah, if he spots the predator in time,
by weaving and cutting back to force the cheetah to break its sprint. Gazelles are
herbivores and feed in open grasslands. This makes them prone to attack from a number
of predators, such as cheetahs, lions and wild dogs. For this reason, gazelles are highly
alert and sensitive to the presence of other animals. They are constantly on the lookout
and have rely heavily on their eyesight, which is excellent due to their large eyes.
Contents
Global5
The global economy will grow faster in 2017
6
FED increased interest rates and anticipated 3 increases for 2017
7
The ECB extended the asset purchasing program, and decreased its amount
8
Oil and commodity prices are recovering
9
Last phases of the shrink in trade
10
Turkey11
Revision in growth
12
Share of investments and construction in the GDP increases
13
Estimates in the Mid-Term Plan need to be revised
14
We shrank after 27 quarters
15
Unemployment increased due to the effect of tourism
16
CBT’s reserves are decreasing
17
Inflation decreased with the decline in food prices
18
Current account deficit started to increase
19
The foreign trade deficit declined in 2016 due to low energy prices
20
Why did exports decline in 2016? 21
Export of goods - countries
22
Number of tourists decreased by 10.7 million in the first 11 months
23
CBT has increased interest rates for the first time since 2014
24
The downward move in market interest rates may turn upwards again
25
While profitability is increasing in the banking sector, non-performing loans are increasing
26
Capital adequacy ratio started to increase in 2016
27
How will 2017 end?
28
About Bakış
30
Bakış 5 - 2017
1
General Outlook
A deliberate but hopeful start for 2017...
Dear reader,
We have left 2016 behind, with
its difficulties, and economic and
political turmoil, both in the world
and in our country. I hope that in
2017 we will witness more positive
results than 2016, and wish for 2017
to create some positive reflections
on our country.
In 2017, we will continue to publish
Bakış quarterly, as we have over the
past year.
With regards to global economy, and
especially emerging countries, 2016
has been a difficult year, due to low
levels of oil and commodity prices.
Most of the oil and other commodity
exporting countries shrank in 2016,
as they did in 2015, and global trade
continued to decline for the same
reason.
Global trade, which has shrunk
around 13% in US dollars in 2015
down to 16.5 trillion US dollars,
continued to decline in the first
3 quarters of 2016. With oil and
commodity prices recovering
towards the end of 2016, even
though it started to recover in the
last quarter, it is expected that
end of year global trade will shrink
compared to 2015, down to 16 trillion
US dollars.
2016 was a difficult year for Turkey
as well. Terrorist attacks, a coup
attempt, relations with Russia,
developments in Syria, increasing
exchange rates all shook the
economy, both internally and
externally. Due to these effects,
the growth performance that the
Turkish economy had enjoyed for 27
quarters ended, and the economy
shrank by 1.8% in the third quarter.
Up until the third quarter of 2016,
the current account deficit declined,
despite losses in tourism, thanks
to the low levels of oil prices, but it
started to increase again with the
recovery in oil prices and losses
in tourism that grew during the
summer period. Shrinkage in this
period also caused unemployment
rates to increase. In the last quarter
of the year, in addition to US dollar
gaining strength, due to the rate cut
by Moody’s and the inland political
risks, the Turkish Lira depreciated
severely. In summary, while the
first half of 2016 started well for the
Turkish economy, the second half
ended in distress, due to political
developments in the world and in
the country.
Murat Alsan
Chairman, KPMG Turkey
Bakış 5 - 2017
3
Global
Regarding the global economy, with the
effects of low levels in oil and commodity
prices, the problems in emerging
economies and the weakening in global
trade, 2016 has been a tough year, with
the lowest growth realized since the Great
Recession. Following strong signals in the
last period in the US economy, an interest
rate increase by FED in December 2016
was taken for granted by the markets. FED
acted accordingly, and increased interest
rates by 25 basis points after the meeting
in December.
In the explanations of FED, instead of
the markets’ expectations of 2 interest
rate increases in 2017, 3 increases were
mentioned. This caused US dollar to
increase to historical levels in recent years.
The recovery in oil and commodity prices
caused inflation in EU countries to move
upwards. Lately, increasing to 0.6% in
November, inflation moved one step closer
to the 2% target specified by the EU.
In the meantime, the European Central
Bank (ECB) extended its asset purchase
program of 80 billion euros by the end of
2017, which was expected to end in March
2017. However, it decided to decrease the
asset purchase amount from 80 billion
euros to 60 billion euros beginning in
March. With inflation increasing towards
targeted levels, it is anticipated that the
ECB will end the asset purchase program
and increase interest rates, just like FED.
With the slowing down of the global
economy, 2016 was a year in which global
trade shrank, due to decreasing oil and
commodity prices and the increase in US
dollar. According to the data of the World
Trade Organization, global trade declined
by 4% in US dollars in the first 10 months.
Bakış 5 - 2017
5
The global economy wil grow
faster in 2017
With regards to the global economy, 2016 was left behind as a tough year.
In 2016, with the effects of the low levels in oil and commodity prices, the
problems in emerging economies and the weakening in global trade, the
global economy realized its lowest growth since 2009.
With the disappearing base effect in oil and commodity prices, that have
started to recover by mid-2016, the developed and emerging economies,
especially the oil exporting countries are expected to rebound in 2017.
Institutions such as the IMF, OECD and World Bank, anticipate about 0.3-0.4
points higher global growth in 2017 compared to 2016.
Global growth expectations (%)
4
3.5
3.4
3.1
3.3
2.9
3
2.8
2.4
2.5
2
1.5
1
0.5
0
IMF
OECD
2016
Source: IMF World Economic Outlook
2017
World Bank
FED increased interest rates and
anticipated 3 increases for 2017
Developments in the US economy are in line
with expectations. An interest rate increase by
FED in December 2016 was taken for granted
by the markets. FED acted accordingly, and
increased interest rates by 25 basis points after
the meeting in December. However, FED’s
expectations for 2017 was a more significant
matter than the interest rate increase. FED
surprised the markets, and raised the expectation
for 2017 to three interest rate increases, which
was two increases as of September 2016. Thus,
USD index reached the highest levels of history
in December.
Expectations are towards US dollar to continue
gaining strength in 2017. With the anticipation
that Trump will boost construction and
infrastructure investments, the US is expected
to grow more aggressively in 2017, and may go
through 3 interest rate increases, as mentioned.
However, it should be considered that at the
beginning of 2016 FED was expected to increase
interest rates 4 times, but only did so once.
USD Index
100.21
98.66
101.9
99.65
97.3
98
93
94.39
88
83
2014
December
November
October
September
July
August
June
May
April
March
February
January
December
October
November
September
July
2015
August
May
June
April
March
January
February
December
October
November
August
September
June
July
79.81
78
2016
Source: Investing.com
Bakış 5 - 2017
7
The ECB extended the asset purchasing
program, and decreased its amount
Growth %
Eurozone
With the recovery in oil and
commodity prices, inflation in
EU countries continues to move
upwards. Lately, increasing to
0.6% in November, inflation
moved one step closer to the 2%
target specified by the EU. In the
meantime, the ECB extended its
asset purchase program of 80
billion euros, which was expected
to end in March 2017, to the end
of the year. However, it decided
to decrease the asset purchase
amount from 80 billion euros to 60
billion euros beginning in March.
With inflation increasing towards
targeted levels, it is anticipated
that the ECB will end the asset
purchase program and increase
interest rates, just like FED.
2.5
2.0
2.0
1.7
1.5
1.5
1.0
0.5
0.0
2015
2016
2017
Source: IMF
Inflation %
Eurozone
0.8
0.6
0.6
0.4
0.2
0
Source: Trading Economics
November
October
September
August
July
June
May
April
March
February
-0.4
January
-0.2
For 2017, with FED applying an
aggressive interest rate increase
policy, the euro/dollar exchange
rate is expected to draw close to 1,
and euro to appreciate again, with
ECB intervention.
Oil and commodity prices are recovering
Brent Oil (USD/Barrel)
80
70
60
50
40
30
2015
December
November
October
September
August
July
June
May
April
March
February
January
20
2016
Source: investing.com
OPEC member countries agreed in the meeting in Vienna towards the end of November that
crude oil supply will be decreased by 1.2 million barrels, down to 32.5 million barrels. In 2016,
OPEC member countries met several times, and fluctuations in oil prices occurred due to
these meetings. However, oil prices which are at 40-50 USD levels since June are expected to
stay permanently over 50 USD, as a result of the agreement. In the coming period, the main
determinant of oil prices will be based on to what extent member countries will adhere to the
agreement.
Commodity Price Index (2014 January=100)
180
160
140
120
100
80
60
40
Coal
Coffee
2015
Cotton
Iron
October
August
June
April
February
December
October
August
June
April
February
December
2014
October
August
June
March
0
January
20
2016
Copper
Nickel
Source: World Bank
Similar to oil prices, commodity prices started to increase again, after reaching the lowest levels
in 2016. But in many metal groups, such as iron, nickel and copper, prices are still below 2014
levels. Coal prices have increased rapidly in the last period and exceeded 2014 prices.
Bakış 5 - 2017
9
Last phases of the shrink in trade
In 2016 global trade shrank, due to
decreasing oil and commodity prices and
the increase in US dollar, just like 2015.
According to the first 10 months’ data
of the World Trade Organization, global
trade declined by 4% in US dollars,
down to 15.8 trillion US dollars. But this
decline has started to decelerate in the
last months.
In the first 6 months, the shrinkage
in global trade was at 5.5%. With the
recovery in oil and commodity prices,
global trade is expected to be at
approximately 16 trillion US dollars as
the end of 2016, and start to increase
again in 2017.
On a country basis, in the first 10
months, US exports declined by 4.6%,
while imports declined by 4%.
In the same period, EU exports and
imports decreased by 1.2% and 0.7%
respectively, while Russian exports
decreased by 21.9%, and imports by
2.7%.
According to the data of the first 11
months, Chinese exports decreased by
7.4% and imports by 6.2%.
Declines in 2016 global trade
Exports
Imports
-4%
-4.6%
-4%
-7.4%
-6.2%
-1.2%
-0.7%
-21.9%
-2.7%
Source: World Trade Organization
Turkey
While the Turkish economy performed quite
successfully in the first half of 2016, the
developments in the second half distressed
this success.
Low levels of oil and commodity prices
in the first half of 2016 compared to the
previous year created a positive effect on
current account deficit and inflation, and
with the 4.5% growth in this period, Turkey
was among the fastest growing countries
in the world. However, throughout the
year, terrorist attacks, a coup attempt and
the political crisis with Russia caused the
number of tourists visiting Turkey to fall
severely and exports to Russia to decrease.
These affected Turkey adversely, both in
terms of growth and current account deficit.
Two religious holidays ran for nine days
each in 2016, which also caused industrial
production to decrease, and the Turkish
economy shrank by 1.8%, ending the
growth performance of 27 consecutive
quarters.
While announcing the third quarter growth
figures, the Turkish Statistics Institute (TUIK)
also announced the revision studies for
GDP calculations according to the ESA-2010
system, which they have been working
on for a while. In the new growth series
announced, investment and construction
contribution increased, and also with the
inclusion of some new areas, Turkey’s
growth of the previous years and GDP
amounts increased. Thus, the average
growth rate of Turkey between 2010 and
2015 increased from 5.2% to 7.4%, and per
capita income of 2015 from 9,257 USD to
11,014 USD.
Despite the revision made, Turkish
economy’s growth by 2.2% in the first
three quarters of 2016 indicates that it will
be difficult to reach the targeted 3.2% by
year end. In 2016, net exports contributed
negatively to growth because of the losses
in tourism, and the decline in exports to
surrounding countries, notably to Russia
and Iraq. We are more optimistic for 2017, if
there are no unexpected shocks.
Bakış 5 - 2017
11
Revision in growth
TUIK switched to the ESA-2010 system
for GDP calculations within the scope of
compliance with Eurostat. EU countries started
to use this system in 2014. Now Turkey has
started to use ESA-2010 as well, with a twoyear delay. The new system was announced
together with the third quarter GDP figures.
Turkey’s GDP size, per capita income, growth
rates after 2009 and all indicators related to
GDP changed.
To summarize:
For 2015, USD based GDP increased from 720
billion USD to 861 billion USD.
For 2015, per capita income increased from
9,257 USD to 11,014 USD.
Average growth rate for the post-global crisis
period (2010-2015) increased from 5.2% to
7.4%.
Average growth rate between 2002 and 2015
increased from 4.8% to 5.9%.
8.8
2010
2011
6.1
1.8
2.2
4.0
5.2
3.0
4.2
2.1
4.8
8.5
9.2
8.5
11.1
Growth (%)
- 4.8
- 4.7
2009
2012
Old series
2013
2014
2015
New series
Source: TÜİK (Turkish Statistics Institute)
2015
2016
2017
Old series
2018
New series
884
975
815
904
756
726
868
720
861
1057
Dollar Based GDP (Mid-Term Plan Estimates - Billion $)
2019
2016*
Share of investments and
construction in the GDP increases
GDP Shares According to Expense Method (%)
Old series 2015
New series 2015
Difference
Consumption
69.1
60.4
-8.7
Public expenditure
15.7
13.9
-1.8
Investments
20.4
29.7
9.3
Inventory differences
-2.3
-1.4
0.9
Export of goods and services
28
23.4
-4.6
Imports of Goods and Services
-30.9
-26
4.9
GDP
100
100
-
The most significant difference between the old series and new series is the changed share of the
items used in GDP calculations (by current prices). In the new series, the share of investments
increased, while the shares of consumption, public expenditures, goods and services exports and
imports decreased. This caused a change in past growth figures.
In the new series, consumption is the most decreasing item (by share), by 8.7 points. Following
consumption, the next most decreasing items were exports and imports. The share of goods and
services exports in GDP decreased from 28% to 23.4%, and for only goods exports, the figure
decreased from 20% to 16.6%. The share of investments increased by 9.3 points, being 29.7%.
Considered by the production methods, we can see that the share of agriculture and services has
decreased, and shares in manufacturing and construction increased with the revision. The increase
for the manufacturing industry was limited with 1.1 points, an increase in the share of construction
being the significant one with 3.8 points.
Agriculture
4.4
Manufacturing
Old series
53.3
8.2
16.7
6.9
7.5
15.6
57.4
GDP Shares According to Production Method (%)
Construction
Services
New series
Bakış 5 - 2017
13
Estimates in the Mid-Term Plan
need to be revised
As the GDP figure increased with the revision, compared to the old series, the Mid-Term Plan that
was revised in October needs to be revised again, in terms of targets and indicators which are
connected to GDP figures.
Current Account Deficit / GDP (%)
5.0
4.5
4.5
4.0
4.3
4.2
3.9
3.7
3.6
3.5
3.5
3.5
3.3
3.0
3.0
2.5
2.0
2015
2016
2017
Old series
2018
With the new series, the ratio
of current account deficit to
GDP decreased from 4.5%
to 3.7% for 2015. According
to the Mid-Term Plan, the
targets for 2016 and 2017 were
4.3% and 4.2%. Therefore,
regarding 2015, the current
account deficit / GDP ratios for
the coming years should be
revised downwards according
to the new series.
2019
New series
Budget Deficit / GDP (%)
1.9
2.0
1.8
1.6
1.4
1.2
1.0
1.6
1.6
1.4
1.3
1.2
1.6
1.3
1.1
1.0
0.8
0.6
0.4
0.2
0.0
2015
2016
2017
Old series
New series
2018
2019
As the GDP of Turkey increased
with the revision, the ratio of
the budget deficit to GDP also
decreased, from 1.2% to 1%
for 2015. For the coming year, if
budget deficit will be the amount
targeted in the Mid-Term Plan,
budget deficit / GDP ratio will be
at 1.6% level, instead of 1.9%.
Q1
Q2
Consumption
Public Expenditure
The Turkish economy shrank by 1.8% in the
third quarter. Thus, the growth trend that
Turkey experience for 27 quarters has now
come to an end.
Regarding the shrinkage in the third quarter,
losses in tourism and long religious holidays
both had an effect. Tourist numbers, which
have been decreasing since the beginning of
the year with the effects of the attempted
coup, terror incidents and the crisis with
Russia, dropped severely in the third quarter.
Both the decrease in the tourism revenues,
and its effects to the sectors servicing the
tourism sector caused the economy to shrink.
- 2.4
- 9.2
- 9.1
2016
- 0.6
- 3.2
- 4.6
0
0.2
3.5
3.7
4.7
7.8
11.1
13.7
23.8
We shrank after 27 quarters
Q3
Investments
Exports
Imports
In the first two quarters, while Turkey was
growing mainly due to internal consumption,
net exports contributed negatively to growth.
In the third quarter, both internal consumption
and net exports contributed negatively to
growth. It is expected that in the fourth
quarter, growth will recover and close the year
at around 2.6%, with the structural reforms
and incentive packages announced by the
Government.
Bakış 5 - 2017
15
Unemployment increased due to
the effect of tourism
The unemployment rate in Turkey has
been around 9% on average since the
Great Recession. However, in recent years
there is an upward trend in unemployment
numbers. The average unemployment rate
which was 9.9% in 2014 increased to 10.3%
in 2015. In 2016, while the unemployment
rate was at lower levels compared to 2015
until June, it started to move above 2015
during the summer season, because of the
problems in tourism. Finally, in September the
unemployment rate was 11.3%, 1 point above
2015.
While the unemployment rate has been
increasing in Turkey for the past 3 years, at
the same time new jobs are being created. In
2015, 806 thousand people were newly hired.
In the first 9 months of 2016, employment
reached 1.1 million people. Although Turkey is
creating jobs more than many other countries,
unemployment is increasing due to the fact
that labor force is increasing every year. In
2016, the ratio of joining the labor force was
on average 0.7 points more than the previous
year.
Unemployment Rate
11.5
11.0
11.3
11.1
10.5
11.3
11.2
10.7
10.6
10.9
10.0
10.1
10.2
10.1
9.6
9.4
9.5
9.0
11.3
9.3
9.3
April
May
9.6
10.3
9.8
8.5
8.0
January February
March
2015
June
July
August September
2016
Labor Force (%)
53.0
52.5
52.5
52.7
52.4
52.1
52.0
52.0
51.7
51.3
51.5
51.0
50.7
52.6
52.8
52.1
52.4
52.1
51.1
50.8
50.4
50.5
50.0
50.1
50.0
January
February
March
April
2015
May
June
2016
July
August September
CBT’s reserves are decreasing
The Central Bank’s (CBT) reserves
reached 136 billion US dollars in
December 2013, a historically high
level. Following US dollar gaining
value throughout the world, and
capital outflows occurring from Turkey,
reserves decreased gradually but have
gone through an increasing trend since
the beginning of 2016.
With the severe fluctuations in
exchange rates in the past 2 months,
CBT reserves declined from 123 billion
USD to 111.7 billion USD, declining by
11.3 billion USD.
Throughout the last year, total reserves
decreased by 1.8 billion USD, compared
to the same month of the previous year.
In this period gold reserves increased
by 3.1 billion USD, and gross foreign
currency reserves increased by 1.3
billion USD.
Central Bank reserves (billion USD)
160.0
135.96
140.0
123
120.0
111.7
100.0
80.0
60.0
40.0
20.0
2010
2011
Gold reserves
2012
2013
Gross foreign currency
reserves
2014
2015
2016
Total reserves
Bakış 5 - 2017
17
Inflation decreased with the
decline in food prices
Inflation, which was at high levels in 2014 and 2015, went through a
downward trend in the beginning of 2016. However, as food prices have
increased beginning from June, inflation also started to increase, but tent
to decrease again with the decline in food prices. Because the weight of
food in the inflation basket is approximately 24%, the volatility in food prices
has determinant effects on inflation. Since the second half of 2016, the
recovery in oil and commodity prices pushed inflation upwards. With TRY
depreciating in significant amounts in the last period, inflation is expected to
increase again in the near future. However, the effect of the exchange rates
is expected to be seen the next year. The first months of 2017 can be tight,
with regards to both foreign exchange - interest, and the real sector, but
especially in the second half we expect milder markets.
Inflation (%)
10.00
9.58
9.50
8.79
8.78
9.00
8.50
7.91
8.00
7.50
7.55
7.24
8.09
8.05
7.64
7.61
7.46
7.58
7.20
7.00
6.57
7.14
6.81
6.58
8.10
7.95
7.28
7.16
7.00
6.50
6.00
January
February
March
April
May
2015
June
July
2016
August September October November
Current account deficit started to
increase
Current Account Deficit / GDP (%)
6.5
6.2
6.0
5.4
5.5
4.8
5.0
4.7
4.7
4.7
4.4
4.5
3.8
3.7
4.0
3.5
3.5
4.1
3.4
3.0
Q1
Q2
Q3
2014
Q4
Q1
Q2
Q3
2015
Q4
Q1
Q2
Q3
Q4
2016
Source: TÜİK, CBT
At the beginning of 2016, there was the expectation that the ratio of current account
deficit / GDP would decrease, with the assumption that the current account deficit
would decrease as of year-end due to low oil prices and that US dollar would not
appreciate severely. However, due to the effects of terror incidents during the year,
tourism losses pushed the current account deficit downwards. In the first 10 months,
the loss in tourism revenues was 7.4 billion USD. At the same time, the base effect
arising from low levels of oil prices ended as of September and turned negative in
December. Namely, oil prices will be at higher levels than the previous year for a long
time. And this means that the current account deficit will continue to increase in the
coming period.
Finally, current account deficit, on an annual basis increased to 33.8 billion USD in
October. This figure was 32.3 billion USD by of end of 2015. According to estimates,
the current account deficit is expected to increase and be around 35 billion USD at
year-end.
With the new GDP series, current account deficit/GDP ratio has also changed.
According to the old series, the current account deficit/GDP ratio for 2015 was 4.5%.
With the new series, it declined to 3.7%. Considering the new series, the lowest ratio
in 2016 was the second quarter, at 3.4%. The ratio, which increased to 3.8% in the
third quarter with the current account deficit increase, is expected to be 4.1% as of
year-end.
Bakış 5 - 2017
19
The foreign trade deficit declined in
2016 due to low energy prices
In 2016, exports were 142.6 billion USD,
decreasing by 0.8%. Exports by volume
(quantities) increased by 4.1%.
142.6
Exports
143.8
There was more shrinkage in imports
than in exports. In 2016 imports declined
by 4.2%, down to 198.6 billion USD.
198.6
Imports
With the decrease in imports being more
than the decrease in exports, the foreign
trade deficit declined. In this period, the
foreign trade deficit decreased by 11.7%,
down to 56 billion USD. Thus, the ratio
of exports to cover imports increased by
2.4 points up to 71.8%. This was 69.4%
in 2015.
207.2
341.2
Volume
351
Foreign
Trade
Deficit
56
63.4
0
100
200
2016
*Values are billion USD.
Source: TÜİK, GTB
300
2015
400
Last year, the decrease in unit prices
due to the decline in oil and commodity
prices was effective in the shrinkage
of exports and imports. The value of
exports per kg was 1.44 USD in 2015,
and decreased to 1.37 USD in 2016.
Import prices also declined severely,
especially due to the low levels in oil
prices. This factor has played the biggest
role in the decline in the foreign trade
deficit of Turkey, an oil importing country.
Another factor in the decline of exports
and imports was the appreciation of
US dollar worldwide. Also, the crisis
with Russia and armed conflicts in the
surrounding countries created downward
effects.
Why did exports decline in 2016?
1. Decreasing export prices
•
Export prices decreased
this year as they did last
year, due to the decline in
oil and commodity prices.
•
Last year the export value
per kg was $1.46, this
year it was $1.37.
2. Russia and Iraq
3. Appreciation in USD
•
Because of the crisis with
Russia and the armed
conflict in Iraq, exports to
these countries declined
severely.
•
•
In 2016, exports to Russia
declined by 57%, to Iraq
by 19%.
Loss: $3.5 billion
As it was the case last
year, our exports declined
because of the appreciation
of USD.
Loss for exchange rate:
$1.5 billion
Loss for Russia: $1.9 billion
Loss for Iraq: $1.1 billion
Loss for Libya: $500 million
If these losses had not occurred, 2016 exports
would have increased by 5%, instead of
decreasing by 0.8%
Source: TİM (Turkish Exporters Assembly)
Bakış 5 - 2017
21
Export of goods - countries
In 2016, Switzerland was replaced by the Netherlands at the list of top 10 countries
that we export to. The ranks of other countries changed as well. Iraq was the third
country that we most exported to in 2015, but in 2016 it was the fourth. It was
replaced by Italy. The United Arab Emirates (UAE) and Iran moved up two places each
and became the seventh and eighth. Spain fell one place back to ninth.
The only country to which our exports decreased is Iraq, among the list of top 10
countries that we export to. The biggest increases in exports were to Iran (35.6%),
and the Netherlands (13.7%).
The increase in exports to Iran, the UAE and the UK, was effected by gold. Excluding
gold, in 2016 exports to Iran increased by 0.1%, and to the UAE decreased by 4.9%,
and to UK by 8.3%. For export increases to EU countries, the automotive sector was
the main determinant.
Country
2015
2016*
Change (%)
Germany
13,417
13,986
4.2
UK
10,556
11,649
10.3
Italy
6,887
7,593
10.2
Iraq
8,550
7,583
-11.3
USA
6,396
6,636
3.8
France
5,845
6,019
3
UAE
4,681
5,078
8.5
Iran
3,664
4,969
35.6
Spain
4,742
5,004
5.5
The Netherlands
3,155
3,589
13.7
Source: TÜİK + TİM data (Values are billion USD).
*2016 year total
Number of tourists decreased by 10.7
mil ion in the first 11 months
Estimates made at the beginning
of the year for the shrinkage in
the tourism sector due to terror
incidents in Turkey and the crisis
with Russia, unfortunately came to
bear. In the first 11 months, tourists
visiting Turkey declined by 30.9%.
The number of visiting tourists
decreased by 10.7 million, down
to 24 million. As for our biggest
competitors in tourism, tourists
traveling to Spain increased by
10.2% up to 67 million in the same
period, and to Greece by 3.9%, in
the first 9 months. As a result, in
terms of the number of tourists
Greece went ahead of Turkey.
In the first 11 months of the year,
the biggest loss in the number of
tourists was Russia, by 2.8 million.
Russia was followed by Germany
with 1.6 million and by the UK
by 793 thousand tourists. In the
same period, tourists from Ukraine
increased by 336 thousand, and
from Georgia by 281 thousand.
Country
2015
2016
Change (%)
Difference
(Persons)
Germany
5,403,222
3,761,584
-30.38
-1,641,638
Georgia
1,760,938
2,041,897
15.96
280,959
UK
2,475,586
1,681,991
-32.06
-793,595
Iran
1,591,490
1,559,714
-2.00
31,776
Bulgaria
1,683,474
1,559,432
-7.37
-124,042
Ukraine
678,518
1,014,215
49.48
335,697
The
Netherlands
1,199,502
880,976
-26.55
-318,526
Russia
3,623,518
822,159
-77.31
-2,801,359
Azerbaijan
567,886
564,748
-0.55
-3,138
Greece
696,166
546,274
-21.53
-149,892
Source: Ministry of Culture and Tourism Number of Persons,
January-November
Losses in the number of tourists affected Turkey’s tourism revenues severely. Tourism revenues
decreased by 30.1% (7.2 billion USD) in the first 10 months of 2016, compared to the previous year. If
the trend continues likewise, it is expected that tourism revenues which were 26.6 billion USD in 2015
will decrease approximately 8 billion USD in 2016, down to 18.6 billion USD. If the decrease in tourism
revenues in the first 10 months of 2016 had not happened, the current account deficit would be 17.9
billion USD for that period, instead of 26.5 billion USD. Namely, the current account deficit would
decrease by 28% compared to the previous year, instead of increasing by 6%. The decline in tourism
revenues at the same time affected the growth performance of Turkey negatively. In the third quarter,
which was the one with the biggest loss in tourism, the Turkish economy shrank by 1.8%, while the
effect of losses in tourism on growth was -1.9. This means if the losses in tourism had not happened in
the third quarter, Turkey would have continued growing.
Bakış 5 - 2017
23
CBT has increased interest rates for
the first time since 2014
CBT Interest Rates (2016-Current)
11.00
10.50
10.00
9.50
9.13
9.00
8.50
8.28
8.78
7.73
8.00
7.50
7.00
6.50
Weighted
Average
Overnight
Borrowing
Overnight
Lending
December
November
October
September
August
July
June
May
April
March
February
January
6.00
Weekly
Repo
Source: CBT
Since March, CBT has decreased the upper band of the interest rate corridor 7 times. Following
this, it did not take any action in October, and in November increased interest rates for the first
time since the beginning of 2014, with the effects of severe increases in exchange rates. The
policy interest rate, which was decreased to 7.5% in February 2015, had not changed since then.
While CBT was increasing policy interest rate by 50 basis points in November, at the same time it
increased the upper band of the interest rate corridor by 25 basis points, up to 8.5%. This level has
decreased from 10.75% to 8.25% since March.
The weighted average funding cost, which was at 9% level at the beginning of 2016, had
decreased to 7.73% level in the last period with the realized interest rate decreases. However, in
line with the interest rate increase in November, it also increased up to 8.28%, back to its level in
June.
Expectations are generally as such that an upward trend in exchange rates will continue in the
short and medium term, and CBT will continue additional interest rate increases.
The downward move in market interest
rates may turn upwards again
Loan interest rates (monthly average)
18.0
17.0
16.0
15.0
14.0
13.0
12.0
Commercial
10/7/2016
18/11/2016
8/26/2016
6/3/2016
7/15/2016
4/22/2016
3/11/2016
1/29/2016
12/18/2015
11/6/2015
9/25/2015
8/14/2015
7/3/2015
5/22/2015
4/10/2015
2/27/2015
1/16/2015
12/5/2014
10/24/2014
8/1/2014
9/12/2014
5/9/2014
6/20/2014
3/28/2014
1/3/2014
2/14/2014
11.0
Consumer
Source: CBT
There is also a decrease in market interest rates, with CBT’s recent interest rate decreases.
However, because the deposit interest rates of banks are at high levels and as the risk
premium of Turkey has increased since the July 15th incident, this decrease has been limited.
A downward movement in market interest rates in the last period were seen in commercial
loans more significantly than consumer loans.
Since March, when interest rate cuts started, commercial loans decreased by 2.9 points and
consumer loans decreased by 1.7 points.
Finally, consumer loan interest rates are at an average level of 14.8%, while commercial loan
interest rates are at 14.5%.
With CBT continuing interest rate increases in the coming period, it is estimated that the
downward trend in market interest rates will end and start to increase again.
Bakış 5 - 2017
25
While profitability is increasing in the banking
sector, non-performing loans are increasing
Ratio of deposits to loans
Non Performing Loans Rate (%)
1800
1600
Billion TRY
1400
1200
0.98
1.03
1.11
1.19
1.18
1.20
1.40
1.20
0.85
1.00
0.80
1000
800
0.60
600
0.40
400
3.8 3.66
3.6
3
2.8
2.2
0.00
2
Loans
Source: BRSA
2013
Deposit
2014
2015
2016
September
2.75
2.85
2.4
0
2012
2.86
2.7
2.6
200
2011
3.1
3.2
0.20
2010
3.32
3.4
2010 2011 2012 2013 2014 2015 2016
September
Loan/Deposit Ratio
Source: BRSA
Total assets of the banking sector continued to increase in 2016. Total assets of the sector were
2.5 trillion TRY as of third quarter of 2016, increasing by 7.5% compared to 2015 year-end. And the
total profit of the banking sector was 29 billion TRY as of third quarter of 2016, increasing by 54.7%
compared to the same period of last year.
In line with the increase in total assets, loans extended and deposits collected by the banks increase
every year. But for the last 7 years, the growing rate of loans has been faster than the growing rate of
deposits. Therefore, deterioration occurred in loan / deposit ratios. This ratio was 0.85 in 2010, and now
it is 1.2. The fact that this ratio is increasing year by year means that banks will have less appetite to
extend loans in the coming period.
Another problematic indicator in the banking sector is the non-performing loans rate. With a lot of
companies going bankrupt or facing severe difficulties during the Great Recession, the non-performing
loans rate was 3.66% in 2010. This rate decreased to 2.7% with the recovery in 2011, and started to
increase then, most recently in September 2016 at 3.32%. This rate continuing to increase might be a
problem for the banking sector in the coming period.
Capital adequacy ratio started to
increase in 2016
Capital adequacy ratio (%)
2500
18.97
16.55
15.28
2000
Billion TRY
20
17.86
16.28
15.56
16.03
18
16
14
1500
12
10
1000
8
6
500
4
2
0
2010
2011
Regulatory
Capital
2012
2013
Risk Weighted
Assets
2014
2015
0
2016 September
Capital Adequacy
Ratio
The capital adequacy ratio of the Turkish banking sector increased to 16.03% in the third quarter
of 2016, by 0.47 points compared to the end of 2015. The level of capital adequacy ratio, which
is calculated by dividing the shareholders’ equity by the risk weighted assets of banks, was
18.97% in 2010, and reached the lowest level in 2013 with 15.28%. The banks’ shareholders’
equity increasing by 9.8% compared to the end of last year was effective in increasing the capital
adequacy ratio in 2016. In the same period, risk weighted assets increased by 6.6%. Having
changed the calculation method of capital adequacy during the year, BRSA was also a factor in the
ratios changing. In 2016 the bank group with the highest capital adequacy ratio was foreign banks
with 16.74%, followed by private domestic banks with 15.16% and by state banks with 16.42%.
Bakış 5 - 2017
27
How wil 2017 end?
Growth
Foreign Trade
In 2017, public
expenditures will have
a high share in growth,
like they had in 2016.
In 2017 export and
import prices will start to
increase again. Therefore,
value based increases will
be realized in exports and
imports.
In addition to public
investments, with the
reforms and incentive
packages announced,
private investments can
also accelerate in 2017
Losses from Russia and
Iraq will be compensated.
Additionally, with oil
prices increasing, our
exports to oil exporting
countries will increase as
well.
Export losses of significant amounts
to markets such as Russia and Iraq
in 2016 will be compensated for in
2017. Also, there will be a recovery in
tourism, even if it may not be as much
as expected. Therefore, net exports
will contribute positively to growth in
2017.
3.8
As for imports, we
will see the effect of
the increases in oil
prices. And we will see
imports increasing, with
domestic consumption
increasing.
2017 foreign trade expectations
The 2017
growth
expectation is
3.8 %
153 billion USD
Imports 209 billion USD
Exports
Markets (year average)
USD / TRY : 3.5
EUR / TRY : 3.6
EUR / USD : 1.03
Oil: $65
Unemployment
10.5%
(year average)
Current Account Deficit
36
(Billion USD)
Expectations
Global markets agree that the world economy will be more
successful in 2017 than in 2016. Behind these thoughts, there are
expectations that oil and commodity prices will increase, economies
of oil exporting countries will recover, and global trade will increase
again, following the two-year decline. Institutions such as the IMF,
OECD and World Bank, all anticipate 0.3-0.4 points higher global
growth in 2017 compared to 2016. Trump's policies are the most
significant risk factor for the global markets in 2017.
With the expectation that Trump will boost construction and
infrastructure investments, the US is expected to grow more
aggressively in 2017, and may go through 3 interest rate increases,
as expected. This, theoretically, points to the fact that the US dollar
will appreciate more in 2017. But of course we cannot know that for
sure. Additionally, the preventive measures that Trump is planning
against China and Mexico are a significant risk factor for global trade.
There is a prevailing expectation that 2017 will be a better year than
2016 for Turkey in terms of growth. In 2017, for reasons such as
export prices starting to increase, tourism losses recovering and
the political crisis with Russia ends, Turkey is expected to grow at
a higher rate, with the strong contribution of net exports in 2017.
In the meantime, reform and incentive package initiatives by the
government are expected to create a boosting effect on investments
and consumption in the second half of 2017.
Bakış 5 - 2017
29
About Bakış
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