Download Presentation before the Planning and Budget Commission of the Grand National

Presentation before the Planning and
Budget Commission of the Grand National
Assembly of Turkey
Erdem Başçı
Governer
June 14, 2012
Outline
I.
Global Economic Developments
II.
The New Policy Framework
III.
External Balance
IV.
Growth
V.
Inflation
2
GLOBAL ECONOMIC DEVELOPMENTS
3
Two Different Phase in Global Crisis
1. Lehman Crisis: Global Effect
2. European Debt Crisis: Selective Effect
4
Increase in Public Debt (2007-2011)
Countries Failing to Sustain
Fiscal Discipline
90
(Ratio to GDP, Percent Points)
Countries Sustaining Fiscal Discipline
(Ratio to GDP, Percent Points)
90
80
80
70
70
60
60
50
50
40
40
30
30
20
20
10
10
0
0
Italy
Spain
Portugal
Greece
Ireland
Turkey
Korea
-10
-10
Source: IMF WEO, CBRT.
Source: IMF WEO, CBRT.
China
Australia
Czech
Republic
Germany
5
Average GDP Growth (2007-2011)
Countries Failing to Sustain
Fiscal Discipline
(Percent)
12
Countries Sustaining Fiscal Discipline
(Percent)
12
10
10
8
8
6
6
4
4
2
2
0
0
-2
-2
-4
-4
Greece
Ireland
Source: IMF WEO, CBRT.
Italy
Portugal
Spain
Germany
Czech
Republic
Australia
Korea
Turkey
China
Source: IMF WEO, CBRT.
6
Increase in Unemployment Rate (2007-2011)
Countries Failing to Sustain
Fiscal Discipline
(Points)
16
Countries Sustaining Fiscal Discipline
(Points)
16
14
14
12
12
10
10
8
8
6
6
4
4
2
2
0
0
-2
-2
-4
-4
Italy
Portugal
Source: IMF WEO, CBRT.
Greece
Ireland
Spain
Germany
Turkey
China
Korea
Australia
Czech
Republic
Source: IMF WEO, CBRT.
7
Housing Sector and the Global Crisis
8
Home Price Indices
US and Spain
(For US: January 2000=100, For Spain: 2005Q1=100)
220
130
120
200
110
180
100
160
Case-Shiller Home Price Index
Spain Home Price Index (r.h.s.)
90
140
80
120
100
70
60
Source: Bloomberg, CBRT.
9
Spain
Total Employment and Home Price Index
(Thousand People, 2005Q1=100)
21500
21000
Employment (thousand people)
Spain Home Price Index (r.h.s.)
130
120
20500
110
20000
19500
100
19000
90
18500
80
18000
17500
17000
70
60
Source: Bloomberg, CBRT.
10
Spain
Unemployment and Non Performing Loans* Rate
(Percent)
30
9
8.27
8
24,4
25
Unemployment Rate
7
Non Performing Loans (r.h.s.)
20
6
5
15
4
10
3
2
5
1
0
Source: Bloomberg, Banco de Espana, CBRT.
0
*NPL Rate = Doubtful Debtors / Loans to Real Sector and Households
11
Turkey and US
115
GDP
Unemployment
(Real, 2007=100)
(Percent)
Turkey
US
12
US
Turkey (r.h.s.)
15
14
110
10
13
8
12
105
6
11
100
10
4
9
95
2
8
90
0
Source: IMF, WEO, CBRT.
Source: IMF, WEO, CBRT.
7
12
Turkey and UK
GDP
Unemployment
(Real, 2007=100)
(Percent)
115
9.0
Turkey
15
UK
UK
Turkey (r.h.s.)
8.5
14
110
8.0
7.5
105
7.0
13
12
6.5
100
6.0
5.5
95
11
10
5.0
9
4.5
90
Source: IMF, WEO, CBRT.
4.0
8
Source: IMF, WEO, CBRT.
13
Turkey and Eurozone
115
GDP
Unemployment
(Real, 2007=100)
(Percent)
Turkey
Eurozone
10.5
10.0
110
Eurozone
Turkey (r.h.s.)
15
14
9.5
13
9.0
105
100
8.5
12
8.0
11
7.5
10
95
7.0
6.5
90
6.0
Source: IMF, WEO, CBRT.
Source: IMF, WEO, CBRT.
9
8
14
Turkey and Japan
115
GDP
Unemployment
(Real, 2007=100)
(Percent)
5.5
Turkey
Japan
15
Japan
Turkey (r.h.s.)
14
110
5.0
13
105
4.5
100
4.0
12
11
10
95
3.5
9
90
Source: IMF, WEO, CBRT.
3.0
8
Source: IMF, WEO, CBRT.
15
THE NEW POLICY FRAMEWORK
16
Against Excessive Credit Growth
Predominant Policy
Before August 2011
Macroprudential Tightening
After October 2011
Monetary Tightening
17
Policies: Post-Lehman
Shock
Outcome of monetary,
financial & fiscal policies
Inflation
IV
III
𝛑*
(target inflation)
II
Output
𝐘
(potential output)
18
Policies: Global Monetary Expansion
Shock
Outcome of monetary,
financial & fiscal policies
Inflation
IV
III
𝛑*
(target inflation)
I
Output
𝐘
(potential output)
19
Policies: European Debt Crisis
Shock
Expected outcome of
monetary, financial &
fiscal policies
Inflation
III
2011Q4 – Present
𝛑*
(target inflation)
I
II
Output
𝐘
(potential output)
20
Multiple Objectives, Multiple Instruments
KEY INDICATORS
INSTRUMENTS
Reserve
Requirements
Macroprudential
Tools
Interest Rate
Corridor
Funding
Strategy
Credit
Policy
Expectations
Weekly
Repo
OBJECTIVES
Interest
Rate
Policy
Credit
Growth
Exchange
Rate
Liquidity
Policy
Price
Stability
Financial
Stability
21
Liquidity Policy
CBRT Interest Rate Corridor
and ISE O/N Repo Rates (Percent)
14
O/N Lending - Borrowing Interest Rate Corridor
ISE O/N Repo Rates
12
10
8
6
4
2
0
Source: ISE, CBRT.
Last Observation: 12 June 2012
22
Credit Policy
TRY Reserve Requirements
18
The range of RRR
Weighted Average RRR
16
14
12
10
8
6
4
2
0
Source: CBRT.
Last Observation: 12 June 2012
23
Primary Balance
Primary Balances of Selected Economies
(Ratio to GDP, percent, 2011)
8
6
4
2
1.9
1.1
0
-2
-4
-6
-8
-10
Source: IMF WEO, Ministry of Development, CBRT.
*IMF forecast
**2012 forecast for Turkey taken from MTP.
24
Budget Deficit (Advanced Economies)
Budget Deficit
(Ratio to GDP, percent, 2011)
11
9
7
5
3
1.5
1.3
1
-1
Source: IMF WEO, Ministry of Development, CBRT.
*IMF forecast
**2012 forecast for Turkey taken from MTP.
25
Public Debt (Advanced Economies)
Public Debt
(Ratio to GDP, percent, 2011)
180
160
140
120
100
80
60
40
39.4
37
20
0
Source: IMF WEO, Ministry of Development, CBRT.
*IMF forecast
**2012 forecast for Turkey taken from MTP.
26
Budget Deficit (Emerging Economies)
Budget Deficit
(Ratio to GDP, percent, 2011)
4
3
2
1.5
1.3
1
0
-1
-2
-3
Source: IMF WEO, Ministry of Development, CBRT.
*IMF forecast
**2012 forecast for Turkey taken from MTP.
27
Public Debt (Emerging Economies)
Public Debt
(Ratio to GDP, percent, 2011)
70
60
50
40
39.4
37
30
20
10
0
Source: IMF WEO, Ministry of Development, CBRT.
*IMF forecast
**2012 forecast for Turkey taken from MTP.
28
EXTERNAL BALANCE
29
Rebalancing
Final Domestic Demand and Exports
(2008Q1=100)
115
110
Export
Final Domestic Demand
105
100
95
90
85
80
75
70
1
2
3
2005
Source: CBRT.
4
1
2
3
2006
4
1
2
3
2007
4
1
2
3
2008
4
1
2
3
2009
4
1
2
3
2010
4
1
2
3
2011
4
1*
2012
*2012Q1 is forecast.
30
Rebalancing
Current Account Balance
(Seasonally Adjusted, 3-Month Average, Million USD)
3000
2000
1000
0
-1000
-2000
-3000
-4000
-5000
CAB
-6000
CAB (excluding energy)
-7000
-8000
1
2
3
2007
Source: TurkStat, CBRT.
4
1
2
3
2008
4
1
2
3
2009
4
1
2
3
2010
4
1
2
3
2011
4
1
2*
2012
* May and June figures are forecasts.
31
Rebalancing
Current Account Deficit
(12-months Cumulative, Billion USD)
80
70
60
50
40
30
20
10
0
Source: CBRT.
32
Consumer Loans
Consumer Loan Growth Rates
(13 Weeks Moving Average, Annualized, Percent)
60
2011
2007-2011 average
2012
50
40
30
20
10
0
Source: CBRT.
Latest Observation: May 25, 2012
33
Total Loans
Total Loan Growth Rates
(13 Weeks Moving Average, Annualized, FX Adjusted, Percent)
60
2011
2007-2011 average
2012
50
40
30
20
10
0
Source: CBRT.
Latest Observation: May 25, 2012
34
Exchange Rates
TRY and Other EM Currencies against USD*
(11.11.2010=1)
1.4
1.35
CBRT Measures
Global Sell-off
1.3
1.25
1.2
1.15
/$
1.1
1.05
1
0.95
EM Average
0.9
Source: Bloomberg, CBRT.
* EM average includes: Brazil, Chile, Czech R., Hungary, Mexico, Poland, S.Africa,
Indonesia, Korea and Colombia. Increase means depreciation against US dollar.
Latest Observations: June 13,2012.
35
Monetary Policy
CBRT Policy Rate, Interest Rate Corridor and
Average Cost of Funding
14
12
10
8
6
4
O/N Lending - Borrowing Interest Rate
Corridor
2
Average Cost of Central Bank Funding
0
Source: CBRT.
Latest Observation: June 12,2012.
36
CBRT International Reserves
Reserves of the CBRT
(FX and Gold, Million USD)
100000
90000
80000
70000
60000
50000
40000
30000
20000
10000
0
Source: CBRT.
Latest observation: June 12, 2012
37
CBRT Gold Reserves
CBRT Gold Reserves
(Million USD)
13000
12000
11000
10000
9000
8000
7000
6000
5000
4000
3000
2000
1000
0
Source: CBRT.
Latest observation: June 12, 2012
38
FX Volatility
Volatility in Emerging Market Currencies
(Percent, Implied for the next 12 months)
30
Turkey
Emerging Markets
25
20
15
10
5
Source: Bloomberg, CBRT.
Emerging market currencies, including Brazil, Chile, Czech Republic, Hungary,
Mexico, Poland, South Africa, Indonesia, Korea and Colombia.
Latest Observations: June 12, 2012
39
Quality of Capital Inflows
Main Sources of Current Account Deficit Finance
(12-months Cumulative, Billion USD)
80
Portfolio and Short-Term*
70
60
FDI and Long-Term**
Current Account Deficit
50
40
30
20
10
0
-10
-20
Source: CBRT.
*Short-term capital movements are sum of banking and real sectors' short term net credit and deposits in banks.
**Long-term capital movements are sum of banking and real sectors’ long term net credit and bonds issued by banks and the Treasury.
40
Components of Current Account Balance
Investments and Savings
(Percent, Current Prices)
30
Current Account Deficit/GDP
Fixed Capital Formation/GDP
Domestic savings/GDP
25
20
15
10
5
0
-5
1998
1999
2000
Source: Ministry of Development, CBRT.
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
*2011 - 2012 data for savings and investments is forecast. 2012 estimate for
current account balance is taken from MTP.
41
GROWTH
42
Capital
Capital Stock
Fixed Capital Formation*
(Constant Prices, 2007=100)
(Percent, Ratio to GDP, Current Prices)
130
24
120
22
110
20
100
90
80
Trend
18
Capital Stock
16
70
14
60
50
12
1234123412341234123412341234123412341234
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: TurkStat, CBRT.
Last observation: 2011Q4
Source: TurkStat, CBRT.
*Annualized
43
Employment
Average Annual Employment Growth**
(Percent, 2007-2011)
5
5
4
4
3
3
2
2
1
1
0
0
-1
-1
-2
-2
-3
-3
-4
-4
-5
-5
Source: IMF WEO, TurkStat, CBRT.
*IMF projections used for end of 2011.
**Difference of natural logs.
44
Employment: Turkey and US
Total Employment*
(Million people)
140
25
US
Turkey (r.h.s.)
135
24
130
23
125
22
120
115
21
110
20
105
19
Source: TurkStat, BLS, CBRT.
*Seasonally adjusted
45
Labor Participation: Turkey and US
Labor Participation Rate*
(Percent)
51.0
71.0
US
70.0
Turkey (r.h.s.)
50.0
69.0
49.0
68.0
67.0
66.0
48.0
47.0
65.0
46.0
64.0
63.0
Source: TurkStat, BLS, CBRT.
45.0
*Seasonally adjusted
46
Employment
Prospects and Employment
(Percent, 3 month moving averages)
89.00
99.0
88.00
94.0
87.00
89.0
86.00
84.0
85.00
Non-Agricultural Employment/Labor Force
79.0
Employment Prospects (r.h.s.)
84.00
74.0
83.00
69.0
82.00
64.0
81.00
59.0
Source: TurkStat, CBRT
47
Leading Indicators for Q2
Consumer and Real Sector
Confidence Index
New Orders*
(Seasonally Adjusted, Monthly)
50
125
Export
Domestic Market
40
115
30
105
20
95
10
85
0
75
CCI
RSCI
-10
65
-20
55
-30
Source: CBRT.
Source: CBRT.
48
Net Exports
Contribution of Net Exports to GDP
(Percent Points)
8.0
6.0
4.0
2.0
0.0
-2.0
-4.0
-6.0
Quarterly
Annual
-8.0
1
2
3
2005
4
1
2
3
2006
4
1
2
3
2007
4
1
2
3
2008
4
1
2
3
2009
4
1
2
3
2010
4
1
2
3
4
2011
Source: TurkStat, CBRT.
49
Gross Domestic Product
Actual GDP
(Base Quarter: 2008Q1, Seasonally Adjusted, Natural Logarithm)
4.75
4.70
4.65
4.60
4.55
4.50
4.45
4.40
1
2
3
2005
Source: TurkStat, CBRT.
4
1
2
3
2006
4
1
2
3
2007
4
1
2
3
2008
4
1
2
3
2009
4
1
2
3
2010
4
1
2
3
2011
4
1*
2*
2012
*2012Q1 and Q2 is forecast.
50
INFLATION
51
Inflation
Inflation in Turkey vs. Emerging Markets
(Percent, Weighted Average)
30
25
20
15
Turkey
10
5
Emerging Markets
0
Source: Bloomberg, CBRT.
Emerging Market Economies: China, Brazil, India, Mexico , Russia, Turkey, Poland, Indonesia,
S. Africa, Argentina, Thailand, Malaysia, Czech Rep., Colombia, Hungary, Romania, Ukraine,
Vietnam, Chili, Peru, Egypt, Morocco, Lebanon and S. Arabia.
*2012 and 2013 end year values are from Consensus Forecast.
52
Inflation
Services and Core Goods Inflation
Core Inflation Indicators (H & I)
(Annual percentage change)
(Annual percentage change)
14
14
H
12
10
Core Goods
Services
I
12
10
8
8
6
6
4
4
2
0
2
-2
0
Source: TurkStat, CBRT.
Source: TurkStat, CBRT.
53
Inflation Expectations
Medium Term Inflation Expectations*
(Percent)
10
12 month
24 month
Target Inflation
9
8
7
6.95
6.38
6
5
4
3
2
Source: CBRT.
*CBRT Survey of Expectations. Latest observations are from the first period survey in June.
54
Inflation
(Percent)
Forecast Range*
Uncertainty Band
Output Gap
Year-End Inflation Targets
Realizations
12
10
8
Control
Horizon
6
4
2
0
-2
-4
Source: CBRT.
* Shaded region indicates the 70 percent confidence interval for the forecast.
55
Structural Reforms


Increasing Domestic Savings
•
Sustaining Fiscal Discipline
•
Increasing Household and Firm Savings

Transition to government subsidized New Private Pension Scheme

Regulations on supporting insurance sector
Decreasing Foreign Dependence in Energy
56
Structural Reforms


Increasing competitiveness, diversity of goods and markets
•
New Incentive System
•
Input Provision Starategy (GİTES)
•
Diversifying export markets
Increasing the quality of financing
•
Encouraging long-term savings
•
Supporting corporate (firms and banks) bond issuance
•
Diversifying government debt instruments: Rent Certificates
•
Tax incentives for Private Participation Capital and Venture Capital Funds
57
Summary

Rebalancing between the domestic and external demand continues as
envisaged.

The improvement in the current account that started after October
2011 continues.

Growth will remain moderate throughout 2012.

Inflation, that has fallen remarkably in May, will decline significantly in
the last quarter reaching to the levels of 6.5% by the end of 2012; and
by mid 2013, it will reach to the target of 5%.
58
Presentation before the Planning and
Budget Commission of the Grand National
Assembly of Turkey
Erdem Başçı
Governer
June 14, 2012