Download CENTRAL BANK OF THE REPUBLIC OF TURKEY

CENTRAL BANK OF THE
REPUBLIC OF TURKEY
PRESENTATION BEFORE THE COUNCIL OF MINISTERS /
THE PLANNING AND BUDGET COMMISSION OF THE
GREAT NATIONAL ASSEMBLY OF TURKEY
Durmuş YILMAZ
Governor
21 April 2009
1
Presentation Outline
I.
International Developments
II.
Effects of the Global Financial Crisis on the Turkish
Economy
III.
Financial Stability in Turkey
IV.
Inflation Outlook
V.
Monetary Policy Stance
2
I. International Developments
3
Global Crisis
The turmoil in the global markets that broke out in July 2007 has not yet come to an end.
What differs this crisis from previous banking crises is that it is not a “classical
banking crisis”; it covers complex and large-volume derivative products.
Risk Appetite Index
Market Capitalization
(Jan 2005 – Apr 2009)
(2001 – 2008*, USD trillion)
70
10
US Stock Market
US Bond Market
US Mortgage Based Securities Market
Credit Default Swap Market
60
Euphoria
8
6
50
4
40
2
30
0
Increasing
Risk Aversion
-2
20
-4
10
Panic
-6
0
2001
2002
2003
2004
2005
2006
2007
2008
-8
2005
2006
2007
2008
2009
* CDS data as of the first half of 2008
Source: ISDA, WFE, SIFMA
Source: Credit Suisse, CBT
4
Global Crisis
The liquidity crunch has been eliminated to a large extent as a result of monetary
policy measures. Nevertheless, asset write-downs and other losses incurred
in this period eroded the capitals of financial institutions and caused massive
damage on balance sheets.
Losses Incurred by the Global Banking Sector
The Difference Between 3-Month LIBOR Rate and
3-Month US Treasury Bills (TED Spread)
(2007 Q2 – 2009 Q1, billion US Dollars, cumulative)
(January 2007 – April 2009, basis points)
500
450
Liquidity measures taken
by the central banks and
the IMF
1400
World
1200
400
1000
350
USA
300
800
250
600
200
Europe
400
150
200
100
50
0
0
01-07 04-07 07-07 10-07 01-08 04-08 07-08 10-08 01-09 04-09
Source: Bloomberg, CBT
2007
Ç2 ve
Öncesi
2007
Ç3
2007
Ç4
Source: Bloomberg, CBT
2008Ç1
2008
Ç2
2008
Ç3
2008
Ç4
2009
Ç1
5
Global Crisis
Financial institutions that managed to survive are still reluctant to extend credits to
the non-financial sector. As a consequence, credit conditions remain tight.
Shares of the Banks Tightening Credit Conditions
Credit Default Swap (CDS) Premia
(2006 Q1 – 2009 Q1, percent)
(June 2007 - April 2009, basis points)
600
90
1200
Bankruptcy of
Lehman Brothers
USA
80
500
70
Europe
60
400
800
Developing Countries
(right axis)
50
40
1000
300
600
200
400
100
200
30
20
10
0
-10
06 Q1
06 Q3
07 Q1
07 Q3
08 Q1
Source: Federal Reserve and European Central Bank, CBT
08 Q3
09 Q1
0
06-07
Firms with credit rating
BBB and higher * (left axis)
09-07
12-07
03-08
06-08
09-08
* Firms with BBB or higher credit ratings in the USA
Source: JP Morgan, CBT
0
12-08
03-09
6
Global Crisis
Extreme tightness in financial conditions still persists despite measures taken by
monetary and fiscal authorities.
Financial Conditions Index
Size of Financial Rescue Packages*
(January 2005 – February 2009)
(2008 - 2010, relative to 2007 GDP baseline, percent )
103
2008
2009
2010
China
0.4
3.2
2.7
S. Korea
1.1
2.3
1.3
Russia
0.0
2.3
1.6
USA
1.1
2.0
1.8
S. Africa
1.7
1.8
-
Canada
0.0
1.5
1.3
Germany
0.0
1.5
2.0
Mexico
0.0
1.5
-
96
Japan
0.4
1.4
0.4
95
France
0.0
0.7
0.7
India
0.6
0.6
-
Brazil
0.0
0.4
0.2
Tight
102
101
USA
100
99
EU
98
97
Japan
Loose
94
2005
2006
Source: Goldman Sachs, CBT
2007
2008
2009
* Excluding financial sector support.
Source: IMF,CBT
7
Effects on the Global Economy
The effect of the global financial crisis on world economies has emerged in an
abrupt and devastating manner since the last quarter of 2008.
Industrial Production in Developed and
Developing Countries
GDP Growth Projections for 2009
(annual percentage change)
15
2
Developing Countries
1
10
0
Euro Zone
-1
-2
-3
(January 2001 – February 2009,
annual percentage change)
5
0
USA
-5
-4
-10
Source: Consensus Forecasts, CBT
-15
01-09
07-08
01-08
07-07
01-07
07-06
01-06
07-05
01-05
07-04
01-04
07-03
01-03
07-02
-20
01-02
Japan
09-08 10-08
11-08 12-08
01-09 02-09
03-09
07-01
-6
Developed Countries
01-01
-5
Source: Bloomberg, CBT
8
Effects on the Global Economy
Global trade displays a sharp downturn on quantity and value bases owing to
the deterioration in financing conditions and the decline in aggregate
demand.
Global Trade Unit Value Index
Global Trade Quantity Index
(January 2003 – January 2009, annual percentage change)
(January 2003 – January 2009, annual percentage change)
30
20
25
15
20
15
10
10
5
5
0
0
-5
-5
-10
-15
2003
2004
Source: CPB, CBT
2005
2006
2007
2008
2009
-10
2003
2004
2005
2006
2007
2008
2009
Source: CPB, CBT
9
Confidence Indices and Leading Indicators
The downward trend in leading indicators and confidence indices led by
malfunctioning of the credit mechanism in the last quarter of 2008 has
recently been replaced by a partial recovery.
Global Purchasing Managers’ Index (PMI)
And Leading Indicators
Baltic Dry Index
(January 2002 – Apr il 2009)
(January 2004 – March 2009)
70
4
14,000
65
Global Leading Indicators 3
(right axis)
12,000
60
2
55
1
50
0
Global PMI (left axis)
45
-1
40
-2
35
-3
30
-4
25
-5
20
2004
-6
2005
2006
Source: Bloomberg, Goldman Sachs, CBT
2007
2008
2009
10,000
8,000
6,000
4,000
2,000
0
2002
2003
2004
2006
2007
2009
Source: Bloomberg, CBT
10
II. Effects of the Global Financial
Crisis on the Turkish Economy
11
Financial Developments in Turkey
The recent recovery in global risk perceptions has favorably affected Turkey’s
risk premium, domestic market interest rates and exchange rates.
Foreign Exchange Rates
Risk Indicators
(1 July 2008 – 17 April 2009, Value of the US Dollar in
Terms of Various Currencies, July 2008=100)
(1 January 2008 - 17 April 2009, basis points)
170
1000
Central and Eastern Europe
Index* (right axis)
160
900
150
800
EMBI+
140
700
130
600
120
500
TRY / USD
(left axis)
110
EMBI+Turkey
400
300
100
90
200
01-08
03-08
05-08
Source: Bloomberg, CBT
07-08
09-08
11-08
01-09
03-09
80
04-08
06-08
08-08
10-08
12-08
02-09
04-09
* Central and Eastern Europe Index: Equally-weighted average of the national
currencies of the Czech Republic, Croatia, Hungary, Lithuania, Poland, Romania,
Slovakia and Ukraine.
Source: Bloomberg, CBT
12
Financial Developments in Turkey
Turkey’s risk indicators performed relatively better in this period. Volatility in the
foreign exchange and capital markets in Turkey remained fairly restricted
compared to other countries.
Exchange Rate Volatility
Stock Market Volatility
(September 2008 - March 2009, standard deviation of daily
changes in foreign exchange rates)
(September 2008 - March 2009, standard deviation of
daily changes in indices)
New Zealand
Chile
Chile
Colombia
Colombia
Mexico
Poland
Czech Rep.
S. Africa
New Zealand
Mexico
Turkey
Turkey
India
Hungary
Korea
Poland
Hungary
S. Africa
Argentina
Czech Rep.
Korea
Brazil
Brazil
0.012
Russia
0.014
0.016
Source: Bloomberg, CBT
0.018
0.020
0.022
0.024
0.026
0.015
0.025
0.035
0.045
0.055
0.065
Source: Bloomberg, CBT
13
Financial Developments in Turkey
Turkey’s risk premium has resisted the deterioration in global risk perceptions more
than implied by her credit rating. Countries that enjoyed a decline in their risk premia,
as in the case of Turkey, also enjoyed room for policy rate cuts.
Change in Credit Ratings and Risk
Premiums of Countries
Change in Policy Rates and Countries’ Risk Premia
(12 September 2008 - 17 April 2009)
(12 September 2008 - 13 April 2009)
450
Russia
400
India
Hungary
350
Change in CDS (basis points)
Change in CDS (basis points)
400
300
Mexico
Korea
250
Poland
S. Africa
Czech Rep.
Chile
200
Colombia
Brazil
150
India
350
Hungary
300
Mexico
250
Korea
200
Brazil
Chile
150
Poland
S. Africa
Czech Rep.
Colombia
Turkey
Turkey
100
100
0
2
4
6
S&P Credit Ratings(1=A+, 9=BB-)
Note: Trend line includes countries other than Turkey.
Source: Bloomberg, CBT
8
-6
-5
-4
-3
-2
-1
0
1
Change in Interest Rates (percent)
Note: Trend line includes countries other than Turkey.
Source: Bloomberg, CBT
14
Turkish Economy
Along with other countries, Turkey is also experiencing a marked economic
slowdown due to the hightened risk perceptions and adverse effects of the
global crisis on the banks’ funding facilities.
Growth Components
Growth components
(2006 Q4 – 2008 Q4, year-on-year contribution, percent)
(2006 Q4 – 2008 Q4, year-on-year contribution, percent)
10
10
GDP
Net Exports
8
6
8
Agriculture
6
4
4
2
2
0
0
-2
Industry
Construction
Services
-2
-4
-4
Final Domestic Demand
-6
-6
Source: TURKSTAT, CBT
Source: TURKSTAT, CBT
08 Q4
08 Q3
08 Q2
08 Q1
07 Q4
07 Q3
07 Q2
07 Q1
-8
06 Q4
08 Q4
08 Q3
08 Q2
08 Q1
07 Q4
07 Q3
07 Q2
07 Q1
06 Q4
-8
15
Turkish Economy
Domestic demand underwent a sharp decline mainly owing to the shrinkage in
private consumption and investment expenditures.
Growth Components
GDP and Final Domestic Demand
(2007 Q1 – 2008 Q4, year-on-year contribution, percent)
(2004 Q1 – 2008 Q4, seasonally adjusted, in constant
prices of 1998, billion TL)
6
28
Final Domestic Demand
4
27
26
2
GDP
25
0
24
-2
23
-4
22
Final Government Expenditures
Net Exports
21
Gross Capital Formation
-6
Stock Changes
Resident Households' Consumption Expenditures
Source: TURKSTAT, CBT
08 Q4
08 Q3
08 Q2
08 Q1
07 Q4
07 Q3
07 Q2
07 Q1
06 Q4
06 Q3
06 Q2
2008 Ç4
06 Q1
2008 Ç3
05 Q4
2008 Ç2
05 Q3
2008 Ç1
05 Q2
2007 Ç4
05 Q1
2007 Ç3
04 Q4
2007 Ç2
04 Q3
2007 Ç1
04 Q2
-8
04 Q1
20
Source: TURKSTAT, CBT
16
Production Side
The downtrend in seasonally adjusted data for industrial production, which has
been continuing since April 2008, became more apparent as of December.
Industrial Production Index* (January 2006 – February2009)
and Capacity Utilization Ratio* (January 2006 – March 2009)
85
125
120
80
Capacity Utilization Ratio
(left axis)
115
75
110
Industrial Production Index
(right axis)
70
105
100
65
95
60
01-05
90
07-05
01-06
07-06
01-07
07-07
01-08
07-08
01-09
* Seasonally adjusted
Source: TURKSTAT, CBT
17
Domestic Demand Side
Domestic demand indicators maintain their weak course, albeit a limited
recovery was observed compared to the previous quarter.
Domestic Sales of White Goods*
(January 2007 – February 2009) and Automobiles*
Demand Indicators
(January 2007 – March 2009)
(January 2007 – March 2009, December 2006=100)
60
170
PMI – New Orders Index*
150
Automobile
Sales
40
130
20
110
0
90
-20
BTS – Next 3 Months’
Domestic Order
Expectation**
White Goods
Sales
-40
70
-60
50
01-07
05-07
09-07
* Seasonally adjusted
Source: WGSA, AMA, CBT
01-08
05-08
09-08
01-09
01-07
05-07
09-07
* PMI: Purchasing Managers’ Index
** Business Tendency Survey
Source: ABN Amro, CBT
01-08
05-08
09-08
01-09
18
Consumer Confidence and Expectations
The deterioration in consumer confidence indices that had displayed a sharp
decline due to the impact of global crisis stopped in recent period.
Consumer Confidence Index*
Growth Expectations*
(January 2007 – March 2009)
(January 2008 – April 2009, percent)
110
6
2008
5
100
2007
4
90
Consumer Confidence Index
(CBT)
80
3
2009
2
1
70
60
0
Consumer Confidence
Index
(CNBC-e)
-1
-2
50
01-07
05-07
09-07
* Seasonally adjusted
Source: CNBC-e, CBT
01-08
05-08
09-08
01-09
-3
04-06
10-06
04-07
10-07
04-08
10-08
04-09
* CBT Survey of Expectations. Growth expectations for each year is indicated by
adding the expectations for the next year to that of the current year.
Source: CBT
19
Credit Market
The downtrend in bank loans that started in the third quarter of 2008 continued
throughout March due to the developments in supply and demand-side.
Monthly Changes in Business and Consumer Loans
Domestic Real Credit Volume
(January 2006 – March 2009, January 2006=100)
190
(January 2008 – March 2009, 4–week moving average, percent)
1.5
180
1.0
170
160
Consumer Loans
0.5
150
0.0
140
130
-0.5
Corporate
Loans
120
-1.0
110
100
01-06
07-06
Source: BRSA, CBT
01-07
07-07
01-08
07-08
01-09
-1.5
01-08
03-08
05-08
07-08
09-08 11-08
01-09 03-09
Source: BRSA, CBT
20
Labor Market
Data on labor market confirm the rapid slowdown in economic activity.
Unemployment Rates*
Change in Non-agricultural Unemployment*
(January 2000 - January 2009, percent)
(January 2000 - January 2009, quarterly change, thousand people)
20
500
400
Non-agricultural
Unemployment Rate
16
300
200
12
100
0
Unemployment Rate
8
-100
-200
4
*Seasonally adjusted
Source: TURKSTAT, CBT
01-09
01-08
01-07
01-06
01-05
01-04
01-03
01-02
01-01
01-00
01-09
01-08
01-07
01-06
01-05
01-04
01-03
01-02
01-01
01-00
-300
*Seasonally adjusted
Source: TURKSTAT, CBT
21
Labor Market
Though the rise in the labor force participation has been influential on the rise
in the unemployment rate, albeit partly, the slowdown in employment is
believed to be the main determinant.
Total Labor Force and Employment
1400
Ratio of Urban Employed Population to Total
Population Over the Age of 15
(January 2007 – January 2009, annual change, thousand
people)
(December 2000 – January 2009, annual moving average,
percent)
67
24
1200
1000
65
22
Women
800
Men
(left axis)
63
600
20
Men
400
61
18
59
16
200
Women
(right axis)
-200
57
Source: TURKSTAT, CBT
14
2009
2008
2006
2005
2004
2003
12
2002
55
2001
1-09
10-08
7-08
4-08
1-08
10-07
7-07
4-07
1-07
-600
2000
Employment
-400
2007
0
Source: TURKSTAT, CBT
22
Labor Market
The decline in non-agricultural employment in January 2009 on annual basis was
mainly driven by the employment loss in industrial sector.
Contribution to Non-Agricultural Employment
(January 2007 - January 2009, percent contribution year-on-year)
5
Services
4
Construction
Industrial
3
2
1
0
-1
-2
01-09
11-08
09-08
07-08
05-08
03-08
01-08
11-07
09-07
07-07
05-07
03-07
01-07
-3
Source: TURKSTAT, CBT
23
Foreign Trade
The seasonally adjusted data indicate that the deterioration in exports that
started in October 2008 stabilized in early 2009. Nevertheless, in view of the
global demand conditions, the recovery in exports is predicted to take a long
time.
Export Volume Index * (January 2007 – February 2009) and
Expectations for Exports** (January 2007 – March 2009)
Real Exports and Imports*
(January 2005 – February 2009, 2005=100)
50
25
40
20
30
15
20
10
10
5
0
0
-10
-5
Export Volume Index (right axis)
-20
-10
-30
150
Exports
140
130
120
110
100
Exports
(excluding gold)
-15
Current Export Orders (left axis)
-40
-20
-50
-25
01-07
05-07
09-07
01-08
05-08
09-08
01-09
* Quarterly cumulative percentage change
** Difference between increase and decrease in expectations for exports in the Business
Tendency Survey (moved one month)
Source: TURKSTAT, CBT
90
80
2005
2006
2007
Imports
2008
2009
* Workday adjusted, deflated by respective price indices and seasonally adjusted.
Source: TURKSTAT, CBT
24
Balance of Payments
Foreign trade deficit and current account deficit have been significantly narrowing
since the third quarter of 2008. The financing requirement has sharply declined
owing to the recovery in current account balance.
Foreign Trade Balance
Current Account Balance
(January 2005 – February 2009, billion USD)
(January 2005 – February 2009*, CAD to GDP Ratio, percent)
7
45
Energy
40
6
Energy
5
35
4
30
3
25
2
Non-energy Current Account*
1
Trade Deficit
Excluding Energy
20
15
0
-1
10
01-05 07-05
01-06 07-06 01-07
Source: TURKSTAT, CBT
07-07 01-08 07-08 01-09
-2
01-05 07-05 01-06 07-06 01-07 07-07 01-08 07-08 01-09
* Forecast
Source: TURKSTAT, CBT
25
Balance of Payments
While the share of corporate sector in financing of the current account deficit
narrowed, that of direct capital inflow pursued a stable course.
Selected Capital Account Figures in Relation to Current Account
(January 2006 – February 2009, 12-month moving average, percent)
100
80
Non-bank Sector
Credits2
60
40
Direct Investment 3
Bank Credits 1
20
0
Portfolio Investments 4
-20
01-06
05-06
09-06
01-07
05-07
09-07
01-08
05-08
09-08
01-09
1 Bank Credits: Short and long term foreign liabilities of the domestic banking sector
2 Non-bank Sector Credits: Short and long term net foreign credit liabilities of the non-bank sector
3 Direct Investment: Direct Investment Flows
4 Portfolio Investments: Equity and treasury bill purchases of foreign residents
26
Balance of Payments
The private sector debt rollover ratio, which decreased to 75 percent in November
2008, stood at 88 percent in the first two months of 2009.
Private Sector Debt Rollover Ratio*
Private Sector Debt Rollover Ratio*
(January 2000 – February 2009, Ratio of External Debt
Utilization to capital payments, percent)
(January 2008 – February 2009, Ratio of External Debt
Utilization to Capital Payments, percent)
260
160
150
140
12 month moving average
Non-banks Sectors
220
Banks
130
180
120
110
140
100
90
100
80
Ticari Krediler
70
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
* Total of short and long-term commercial, banking sector and other sector credits.
Source: TURKSTAT, CBT
60
1-08
3-08
5-08
7-08
9-08
11-08
1-09
* Total of short and long-term credits
Source: TURKSTAT, CBT
27
Balance of Payments
Balance of Payments Developments in October 2008- February 2009 period
USAGE
Billion USD
Current Account
Balance
-5.3
Portfolio Investments
-8.8
(Equity
Equity,
Equity Debt instruments,
Currency and Deposits )
Credits
(Trade, Banks, Government, Other
Business Services)
-9.7
SOURCE
Net Errors and
Omissions
Billion USD
14.9
FDI
5.2
Other
2.0
Reserve Assets
1.7
(Official Reserve, FX Deposit in
Banks)
Net Errors and Omissions
Residents in Turkey have transferred FX deposits from abroad to banks in Turkey due to the
certain reasons like Repatriation Amnesty.
Savings not registered in the banking sector have been sold in exchange for Turkish Lira.
Foreign currency losses/gains realized during the accounting of the FX transactions.
28
III. Financial Stability in Turkey
Banking Sector
Corporate Sector
Household
Public Sector
29
Banking Sector
The banking system in Turkey entered the global crisis with a relatively strong
position. The main factor reinforcing the resilience of our economy in the face of
the global crisis is the sound and stable structure of our financial system.
FX Position
Net FX Position
(January 2008 – April 2009, billion USD)
(2000 Q1 – 2009 Q1*, billion USD)
14
14
Off balance sheet
position
12
10
12
10
8
8
6
6
4
4
2
2
0
-2
0
-2
-4
-4
-6
-6
-8
-8
-10
-10
On balance sheet
position
-12
-14
01-08
02-08
04-08
Source: BRSA, CBT
05-08
07-08
09-08
10-08
01-09
03-09
1
0
-1
-2
-3
-4
-5
-6
-12
-14
-7
2000
Q1
2001
Q1
2002
Q1
2003
Q1
2004
Q1
2005
Q1
2006
Q1
2007
Q1
2008
Q1
2009
Q1
* As of 4 February 2009
Source: BRSA, CBT
30
Banking Sector
High level of capital adequacy ratio and short-term liquidity adequacy ratio and low
level of FX positions have enhanced resilience of our financial system.
Capital Adequacy Ratio
Short-term FX
Liquidity Adequacy Ratios
(July 2007 – February 2009, percent)
24
300
20
250
16
200
12
150
(1 January 2008 – 3 April 2008, percent)
0-7 days
Up to 1 month
Target ratio: 12 percent
8
100
Legal limit: 8 percent
Source: BRSA, CBT
03-09
01-09
11-08
09-08
07-08
05-08
03-08
Legal limit: 80 percent
01-08
01-09
11-08
09-08
07-08
05-08
03-08
01-08
0
11-07
0
09-07
50
07-07
4
Source: BRSA, CBT
31
Banking Sector
Non-performing loan ratio has been increasing since September 2009.
Non-Performing Loan Ratio
(March 2005 – April 2009, percent)
10
9
8
Credit Cards
7
6
5
Commercial Loans
4
3
Consumer Loans
2
1
0
03-05
09-05
03-06
09-06
03-07
09-07
03-08
09-08
03-09
Source: BRSA, CBT
32
Corporate Sector
The FX position of the non-banking sector reached USD 78 billion by the last
quarter of 2008.
Firms’ FX Assets and Liabilities
Maturity Composition of Firms’ Outstanding
Long-Term FX Denominated Foreign Debt*
(2005 – 2008 Q4 billion USD)
(February 2009, billion USD)
FX Liabilities
200
45
167
161
154
FX Assets
150
129
100
108
50
63
40
139
35
117
30.2
30
100
72
41.9
172
66
73
68
78
81
86
87
83
25
46
19.0
20
13.5
15
0
2005
2006
2007
Q1
2007
Q2
2007
Q3
2007
Q4
-50
2008
Q1
2008
Q2
2008
Q3
2008
Q4
10
5
0
2009
-100
2010
2011
2012+
Net FX Position
Source: CBT
* Number of days to maturity
Source: CBT
33
Corporate Sector
75 percent of small and medium-scale enterprises does not have FX-denominated
debt. The FX-denominated loans are used mostly by large-scale enterprises and
export-oriented manufacturing companies.
Ratio of Corporate Sector’s Short Term
Debt to Total Debt*
Debt Dollarization of the Real Sector
(2000 – 2007, percent)
(2000 – 2007, percent)
90
90
Firms with High Export Share
Manufacturing Sector
80
Manufacturing Industry
80
Non-Manufacturing Sectors
Firms with Low Export Share
70
70
Non-manufacturing
Sector
60
60
50
50
40
* According to days to maturity
Source: CBT
2007
2006
2005
2004
2003
2002
2001
30
2000
2007
2006
2005
2004
2003
2002
2001
2000
40
Source: CBT
34
Corporate Sector
Funding conditions of the corporate sector have deteriorated sharply as of the last
quarter of 2008 . However, it is observed that rollover ratios of corporate sector
have gone into a stable course recently.
Net Foreign Debt Usage
(January 2008 – February 2009, billion USD)
5.0
4.0
Non-banks Credits
3.0
2.0
1.0
0.0
-1.0
Trade Credits
-2.0
01-08 02-08 03-08 04-08 05-08 06-08 07-08 08-08 09-08 10-08 11-08 12-08 01-09 02-09
Source: CBT
35
Households
The ratio of household indebtedness is at a low level compared to the EU and
Eastern European countries. The share of FX loans in total consumer loans is quite
limited and this curbs households’ exchange rate exposure.
20
Ratio of FX-Indexed Consumer Loans to Total
Consumer Loans
(2003 – April 2009, percent)
Ratio of Household Liabilities to GDP
(2005 – 2007, percent)
70
18
60
55
16
56
56
50
14
Eastern
Europe
12
40
10
European
Union
8.6
Turkey
30
8
28
6.4
6
23
4.8
4.7
3.6
4
3.8
4.5
10
2
17
20
12
10
8
0
2003
Source: CBT
2004
2005
2006
2007
2008
April
2009
0
2005
2006
2007
Source: European Central Bank, CBT
36
Public Sector
The public sector has become more resilient to external shocks in time.
Public Sector Net Debt Stock
Composition of Central Government Debt
(2000 – 2008 Q4, ratio to GDP, percent)
(2003 – 2009*)
Total Net Debt Stock
66
70
61
60
Total Net Debt Stock
55
46
49
50
43
34
35
34
33
33
32
35
33
32
2006
2007
2008
2009
38
37
28
32
31
30
31
2004
2005
Net Foreign Debt
39
42
36
40
34
38
30
31
42
29
36
29
28
29
26
25
24
24
29
35
20
30
24
6
4
1
1
2
1
2
2008Ç1
2008Ç2
2008Ç3
2008Ç4
13
2004
2003
2002
2001
0
2000
27
2007
17
14
27
2006
10
28
25
2005
28
Source: Undersecretariat of Treasury, CBT
2003
Fixed
Variable
* As of February 2009.
Source: Undersecretariat of Treasury, CBT
FX
37
Central Bank FX Reserves
The strong foreign exchange reserve position helps eliminate the unfavorable
effects of potential shocks and contributes to increasing confidence in the
economy.
Ratio of Short-term Foreign Debt to Central
Bank FX Reserves
Central Bank FX Reserves
(2002 – April 2009, billion USD)
(1996 – 2008 Q4, percent)
160
80
71.3
70.0
140
70
63.7
58.3
60
48.3
50
40
33.7
30
120
100
80
36.0
27.0
60
20
40
10
20
0
0
2002
2003
Source: CBT
2004
2005
2006
2007
2008
2009
96 97 98 99 00 01 02 03 04 05 06 07 08
Source: Undersecretariat of Treasury, CBT
38
IV. Inflation Outlook
39
Price Stability and Monetary Policy
Price Stability
Deflation Risk
Inflation Risk
• Steep increase in the global unemployment rate.
• Excessively low policy rates in real terms.
• Loss of confidence in investors and consumers.
• Excessive funding of the markets by central banks
• Weakening of the global demand.
• Shrinkage of domestic demand in economies.
• Delay in recovery of global growth.
...may lead to persistent declines in price.
• Global expansionary fiscal policies.
• Recovery of global growth earlier than expected.
• Failure to tighten fiscal and monetary policies on
time.
... may cause inflationary effect in the medium
term
Monetary Policy Stance of Central Banks
40
40
Deflation Risk
Deflation, which is accompanied by contraction in the domestic demand and
concerns over financial stability, may have devastating effects on growth.
Growth and Inflation in the USA
(annual percentage change)
1930-1933
2009
0
-1
-2
CPI**
-3
GDP*
-4
-5
-6
-7
-8
CPI
GDP
* Forecast (Consensus Forecast)
** Forecast (The Economist)
Source: BEA, BLS, CBT
41
Poland
England
Spain
Korea
New Zealand
Mexico
Canada
Australia
South Africa
Portugal
Netherland
Denmark
Russia
China
Austria
0.8
Greece
Ireland
Luxembourg
France
Italy
Germany
Belgium
Finland
Norway
Taiwan
USA
Japan
Deflation Risk
The global economy faces an apparent risk of deflation
for the first time since the 1930s.
Deflation Vulnerability Index
(2009)
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
Source: IMF
42
Monetary Policy Against Deflation Risk
In the forthcoming period, the level of flexibility of economies vis-à-vis deflationary
pressures will play a significant role in the decoupling of the economies. In this
context, the course of real interest rates is believed to be an important indicator.
Real Policy Rates
(As of March 2009*, percent)
Ukraine
Iceland
Israel
Korea
Malaysia
Russia
Chile
Indonesia
Czech Republic
Poland
Peru
Mexico
Colombia
Thailand
S.Africa
Romania
Turkey
Hungary
Brazil
China
-10
-8
-6
-4
Source: CBT, Central Banks and Statistical Offices
-2
0
2
4
6
8
43
Fiscal Policy Against Deflation Risk
Slowdown in economic activities and counter-cyclical fiscal policies have led to
rise in budget deficits in many countries.
2008 Budget Deficit and 2009-2010 Budget Deficit Forecasts*
(Ratio to GDP, percent)
India
England
Japan
USA
France
Developed
Economies
Turkey
Developing
Economies
China
Mexico
S.Africa
Brasil
0
-2
-4
-6
2008
-8
2009
-10
2010
-12
•
•
KEP forecasts are used for Turkey and IMF forecasts for the rest.
Source: IMF, KEP, CBT
44
Deflation Risk and Labor Market
Decline in non-agricultural employment driven by the dwindling consumption and
investment expenditures is a factor increasing deflationary risks.
Non-agricultural Employment
(January 2007 – February 2009, annual percentage change)
5
4
3
Turkey
2
1
EU
0
-1
-2
USA
-3
01-09
10-08
07-08
04-08
01-08
10-07
07-07
04-07
01-07
-4
Source: TURKSTAT, BLS, EUROSTAT, CBT
45
Deflation Risk and Credit Market
Failure to overcome tightness in the financial conditions, due to deterioration in
risk perceptions, is another potential factor for decoupling.
Credit Market
(January 2008 – April 2009, 4-week moving average, percent)
24
22
Interest Rate on TRY
Denominated Commercial Loan
20
18
16
14
Interest rates on BB-rated US corporate bonds
(US Dollar Denominated)
12
10
8
01-08
03-08
05-08
07-08
09-08
11-08
01-09
03-09
* Interest rates on bonds issued by US firms with BB credit rating.
Source: JP Morgan, CBT
46
Commodity Prices
Commodity prices remain low parallel to the slowdown in global growth
Commodity Price Index
(1 January 2006 – 16 April 2009)
600
500
400
Agriculture
300
Metals
200
Energy
100
01-06
05-06
09-06
01-07
05-07
09-07
01-08
05-08
09-08
01-09
Source: Bloomberg
47
Inflation Developments in Turkey
The steady decline in annual inflation was temporarily interrupted in March owing
to soaring unprocessed food prices.
Consumer Price Index
Food and Energy Inflation
(January 2007 – March 2009, annual percentage
change)
(January 2007 – March 2009, annual percentage
change)
13
20
12
18
Food and Energy
11
16
10
CPI
14
9
12
8
10
Source: TURKSTAT, CBT
01-09
10-08
07-08
04-08
01-08
10-07
07-07
04-07
01-09
10-08
07-08
04-08
4
01-08
4
10-07
6
07-07
5
04-07
8
01-07
6
CPI excluding Food
and Energy
01-07
7
Source: TURKSTAT, CBT
48
Inflation Developments in Turkey
The slowdown in services prices that started in the final quarter of 2008 on weaker
economic activity and lower costs intensified in March, and annual services
inflation dropped by about 1 percentage point.
Goods and Services Inflation
Services Inflation
(January 2007 – March 2009, annual percentage change)
(January 2007 – March 2009, annual percentage change)
14
25
Services Inflation
12
Transportation
20
Rent
10
15
8
Restaurants and
Hotels
10
6
Goods
Inflation
5
Other Services
4
Source: TURKSTAT, CBT
03-09
01-09
11-08
09-08
07-08
05-08
03-08
01-08
11-07
09-07
07-07
05-07
03-07
01-07
03-09
01-09
11-08
09-08
07-08
05-08
03-08
01-08
11-07
09-07
07-07
05-07
03-07
01-07
0
Source: TURKSTAT, CBT
49
Inflation Developments in Turkey
Due to the sharp increase in unprocessed food prices, contribution of food and
energy prices to headline inflation soared in March 2009.
Food Prices
(January 2007 – March 2009, annual percentage change)
30
26
22
Processed Food
18
14
10
Unprocessed Food
6
2
03-09
01-09
11-08
09-08
07-08
05-08
03-08
01-08
11-07
09-07
07-07
05-07
03-07
01-07
-2
Source: TURKSTAT, CBT
50
Inflation Developments in Turkey
The ongoing slowdown in economic activity continued to mitigate the exchange
rate pass-through on durable goods’ prices.
Durable Goods Prices
Durable Goods Prices and Exchange Rate*
(January 2008 – March 2009, annual percentage change)
(January 2006 – March 2009, annual percentage change)
15
16
Electrical and NonElectrical Appliances
10
40
14
Durable Goods
(Excluding gold, left axis)
12
10
Furniture
8
5
30
20
Exchange Rate Basket
(right axis)
6
4
10
2
0
0
0
-2
-5
Automobile
-4
-10
-6
01-09
10-08
07-08
04-08
01-08
10-07
07-07
04-07
01-07
10-06
07-06
04-06
03-09
01-09
11-08
09-08
07-08
05-08
03-08
01-08
Source: TURKSTAT, CBT
-20
01-06
-8
-10
* Equally weighted US dollar – euro
Source: TURKSTAT, CBT
51
Inventory and Cost Developments
It is envisaged that there will be an acceleration in the depletion of inventories of
firms, which in turn, would partially add to the exchange rate pass-through on the
prices of durable goods.
Stock of Finished Products*
(January 2007 – March 2009)
25
20
15
10
5
0
01-07
04-07
07-07
10-07
01-08
04-08
07-08
10-08
01-09
* Difference between "above the season” and “below the season” answers given to the current stock of finished
goods question in the “Business Survey” conducted by CBT.
Source: CBT
52
Inflation Expectations
As the inflation data vindicated the policy rate cuts, inflation expectations reacted
favorably. A significant improvement in medium-term inflation expectations
observed particularly since January.
Inflation Expectations
10
(January 2006 – February 2009, annual percentage change)
9
8
12 Month
Expectations
7
6
5
4
01-06
24 Month Expectations
05-06
09-06
01-07
05-07
09-07
01-08
05-08
09-08
01-09
Source: TURKSTAT, CBT
53
Inflation and Output Gap
It is expected that it will take some time for the economic activity to recover,
downward pressures on inflation will prevail and the disinflation process will gain
pace in the short-term.
Inflation and Output Gap Forecasts
(2008 Q3 – 2011 Q4)
Forecast Range*
Output Gap (Base)
Uncertainty Band for 2009
End-Year Inflation Targets
12
10
Control
Horizon
8
4
2
0
-2
-4
11-IV
11-III
11-II
11-I
10-IV
10-III
10-II
10-I
09-IV
09-III
09-II
09-I
-8
08-IV
-6
08-III
Percent
6
Source: CBT
54
V. Monetary Policy Stance
55
Monetary Policy
Coupled with worries related to a more-than-anticipated slowdown in economic
activity due to the economic crisis, inflation concerns were replaced by
deflation risk.
Inflation Rate
Unconventional Monetary Policy
Practices
(January 2000 – January 2009, annual percentage
change)
12
Country
Measures
Purchase of Mortgage Backed Securities
(MBS) worth 1.25 trillion US Dollar in 2009.
10
Developing Countries
8
USA
Purchase of long-term Treasury securities
worth 300 billion US Dollar.
6
Developed Countries
Purchase of toxic assets.
4
2
0
00
01
02
03
04
05
06
07
08
09
England
Purchase of corporate, medium and longterm Gilts, worth 75 billion Pound.
Switzerland
Purchase of CHF denominated corporate
sector debt instruments.
Kaynak: IMF
56
Monetary Policy
Central banks of developing countries maintained a cautious stance in the first half
of 2008 in view of the depreciation of exchange rates and concerns over financial
stability.
Inflation (January 2008 – February 2009, average, annual percentage change)
and Policy Rates in Emerging Markets (January 2008 – March 2009, average, percent)
10
Inflation Rate
9
8
Policy Rate
7
6
03-09
02-09
01-09
12-08
11-08
10-08
09-08
08-08
07-08
06-08
05-08
04-08
03-08
02-08
01-08
5
Source: CBT, Central Banks
57
Monetary Policy
With the disappearance of factors that were driving the inflation rate up, Central Bank of
Turkey started monetary easing and thereby assumed a leading role amongst the
emerging markets.
Policy Rate Change in Emerging Market Economies (percent)
February 2008 – August 2008
September 2008 – April 2009
Romania
Turkey
Brazil
Chile
Chile
Colombia
Turkey
S. Korea
Peru
Poland
Indonesia
Thailand
Hungary
Czech Rep.
Mexico
Brazil
Poland
Mexico
Indonesia
Colombia
Thailand
Peru
S. Korea
Romania
Czech Rep.
Hungary
0.0
1.0
Source: CBT, Central Banks
2.0
3.0
-8.0
-6.0
-4.0
Source: CBT, Central Banks
-2.0
0.0
2.0
58
Monetary Policy
To have a better understanding of the monetary policy pursued by the CBT, it is
imperative to take into account global and domestic economic conditions.
CBT O/N Interest Rates
(January 2005 – April 2009, simple, percent)
20
18
16
14
May-June
2006
12
After October
2008
10
04-09
01-09
10-08
07-08
04-08
01-08
10-07
07-07
04-07
01-07
10-06
07-06
04-06
01-06
10-05
07-05
04-05
01-05
8
Source: CBT
59
Monetary Policy
Key Drivers of the Monetary Policy :
Domestic and external supply-demand
conditions and factors affecting them
Core inflation indicators
Financial and monetary conditions
Monetary Policy
Stance
Changes in import prices, labor costs,
commodity and other input prices
Central Bank’s inflation forecasts
and factors affecting the medium-term
inflation expectations
60
How Monetary Policy Evolved After 2002?
III
II
Adverse Supply Shock
2008 Q2
Rising
inflation
Strong Demand and
Adverse Supply Shock
2006 Q2
Policy Reaction
Policy Reaction
Target revision,
Measured rate hikes
Price Stability
Strong monetary
tightening
TARGET
(Inflation Target)
IV
Falling
inflation
I
Weak Demand Shock
Favorable Supply Shock
2008 Q4
2003-2005
Policy Reaction
Policy Reaction
Policy rate cuts
Precautionary rate cuts
and Non-interest rate
instruments: Stronger
regulation and supervision
Contracting
GDP
Sustainable
Growth
Expanding
GDP
61
Monetary Policy
Central Bank implemented monetary tightening during the turbulence in 2006 in order to
contain the effects of exchange rate depreciation on inflation expectations under strong
domestic and external demand conditions.
CBT Short-Term Interest Rates and
Benchmark Government Securities
CBT Policy Rate and Exchange Rate*
(January 2005 – February 2009)
(1 January 2006 – 31 December 2006 , compound, percent)
20
20
Policy Rate (right axis)
18
15
26
Benchmark Government Securities
Interest Rate
24
16
22
14
10
12
Monthly Change in
FX Basket (left axis)
10
5
8
20
18
Policy Rate
16
6
14
4
* Equally weighted US dollar - euro basket
Source: CBT
Source: Undersecretariat of Treasury, CBT
12-06
11-06
10-06
09-06
08-06
07-06
06-06
05-06
04-06
10
03-06
01-09
09-08
05-08
01-08
09-07
05-07
01-07
09-06
05-06
01-06
09-05
05-05
0
01-05
-5
12
02-06
2
01-06
0
62
Monetary Policy
In the current juncture, economic developments not only necessitated but also
made possible a “controlled but quite rapid rate cut cycle”.
Pass-through from Exchange Rates to Goods and
Services’ Prices
Output Gap
(2004 Q4 – 2008 Q4, percent)
1
(5 –month cumulative percentage change)
25
May 2006 - September 2006
0
October 2008 - February 2009
20
-1
15
-2
May-June
2006
-3
10
-4
5
After October
2008
-5
0
-6
-5
-7
04-Q4
Source: CBT
05-Q4
06-Q4
07-Q4
08-Q4
Exchange
Durable
Rate Basket Goods (ex.
Gold)
Furniture
* Equally weighted, US dollar – euro basket
Source: TURKSTAT, CBT
Electric and Automobiles
Non-Electric
Appliances
63
Monetary Policy
Interes rates on benchmark government securities adopted a sharp downward
course in view of the moderate recovery in risk perceptions and the Central
Bank’s rate cuts backed by the announced inflation data.
CBT Short-Term Interest Rates and
Benchmark Government Securities Interest Rate
26
(1 January 2008 – 18 April 2009, compound, percent)
Benchmark Government Securities
Interest Rate
24
22
20
18
16
Policy Rate
14
12
10
01-08
03-08
05-08
07-08
09-08
11-08
01-09
03-09
Source: Undersecretariat of Treasury, CBT
64
Monetary Policy Stance
The tightness of financial conditions still persists to some degree despite recent policy
rate cuts. Nevertheless, it is noteworthy that lending rates have recently declined below
the levels observed in October 2008, when the global financial turmoil reached its peak.
Commercial Loan Interest Rates
Consumer Loan Interest Rates
(January 2008 – April 2009, annual percentage)
(January 2008 – April 2009, annual percentage)
32
32
30
30
28
28
26
26
Other
Consumer Credit
24
24
22
22
20
* 4-week moving average
Source: BRSA, CBT
Interest Rate
Cuts
Housing
18
04-09
03-09
02-09
01-09
12-08
11-08
10-08
09-08
08-08
07-08
06-08
05-08
16
04-08
03-09
02-09
12-08
11-08
10-08
09-08
08-08
07-08
06-08
05-08
04-08
03-08
02-08
01-08
16
01-09
Interest Rate
Cuts
03-08
18
02-08
Commercial Credit
01-08
20
Automobile
* 4-week moving average
Source: BRSA, CBT
65
Monetary Policy Stance
In 2009, rise in the public sector borrowing requirement may impair monetary policy
decisions’ impact on the economic activity. Short-term expansion in the fiscal policy
should be supported by a fiscal framework that would ensure the medium-term
sustainability of the debt dynamics.
Central Government Tax Revenues and Primary Expenditures
(March 2007 – March 2009, annual percentage change, quarterly moving average)
35
30
Primary Expenditures
25
20
15
10
5
0
-5
Tax Revenues
03-09
12-08
09-08
06-08
03-08
12-07
09-07
06-07
03-07
-10
Source: Undersecretariat of Treasury, CBT
66
Measures on Turkish Lira Liquidity
The general framework of the Central Bank’s liquidity management is fairly flexible
and well-structured to effectively meet the liquidity requirement of the banking
system.
Policy Rate and Overnight Interest Rate in the
Repo-Reverse Repo Market
TL Liquidity Provided by the Central Bank
(1 January 2008 – 28 February 2009 , billion TL)
(Between 1 January 2008 - 28 February 2009, percent)
20
25
Sterilization
19
Overnight
Interest Rate
18
Funding
20
15
17
16
10
15
5
Policy Rate
14
0
13
-5
12
-10
11
02-09
01-09
12-08
11-08
10-08
09-08
08-08
07-08
06-08
05-08
04-08
03-08
02-08
02-09
01-09
12-08
11-08
10-08
09-08
08-08
07-08
06-08
05-08
04-08
03-08
02-08
01-08
Source: ISE, CBT
01-08
-15
10
Source: CBT
67
Potential Measures on TL Liquidity
In case of an increase in TL liquidity squeeze in the market in the
upcoming period, the Central Bank will take the following measures,
provided that they do not conflict with the price stability objective;
1.
The operational structure may be modified by bringing forward
a technical interest rate cut,
2.
Depending on the course of the liquidity squeeze,
a.
extension of the maturity of repo funding,
b.
direct purchases of government securities from the
secondary market
could be considered.
3.
If the liquidity squeeze becomes permanent and other
measures fall short of being sufficient, TL required reserves
may be reduced moderately.
68
Measures on FX Liquidity
The Central Bank is well aware of the significance of FX liquidity in the banking
system and progressively puts into effect necessary measures in order to get
through this period with minimum damage.
Outstanding Balance for FX Deposits and
Interest Rates in the FX Deposit Market
(9 October 2008 – 28 February 2009)
1.0
5
Outstanding FX Deposits
(billion US Dollar, left axis)
0.6
Interest Rate
(1-month, right axis)
Interest Rate
(1-week, right axis)
0.4
4
3
Percent
0.8
2
0.2
1
Source: CBT
26-02
19-02
12-02
05-02
29-01
22-01
15-01
08-01
01-01
25-12
18-12
11-12
04-12
27-11
20-11
13-11
06-11
30-10
23-10
0
16-10
0.0
09-10
Billion US Dollar
6
69
Measures on FX Liquidity
In response to speculative price formation due to a decrease in the depth of the
foreign exchange market, the CBT resumed foreign exchange selling auctions on
10 March 2009. After 18 auctions, they were suspended on 3 April.
FX Selling Auctions
(October 2008 – April 2009)
250
1.80
Price
Amount Asked
(million US Dollar, left axis) (Weighted Average, right axis)
200
1.75
150
1.70
100
1.65
Amount Sold: 50 million US Dollar
2.4.2009
1.4.2009
31.3.2009
30.3.2009
27.3.2009
26.3.2009
25.3.2009
24.3.2009
23.3.2009
20.3.2009
19.3.2009
18.3.2009
17.3.2009
16.3.2009
13.3.2009
1.55
12.3.2009
0
11.3.2009
1.60
10.3.2009
50
70
Export Rediscount Credits
In order to mitigate the adverse effects of the global financial turmoil on the
corporate sector, the limit for export rediscount credits was increased from USD
500 million to USD 2.5 billion and the utilization of these credits was facilitated.
Export Rediscount Credit Utilization
(1992 – April 2009)
600
513
500
400
300
200
1993
1994
1995
1996
12
12
54
32
31
27
20
3
2
2
2008
1
39
2007
1
29
2006
5
1998
12
1997
10
1992
100
* As of 17 April 2009
Source: CBT
2009*
2005
2004
2003
2002
2001
2000
1999
0
71
Potential Measures on FX Liquidity
The Central Bank, when deemed necessary, will always continue to take
additional measures within its means prudently in order to ensure the smooth
functioning of the FX market and to support FX liquidity
Measures That May Be Taken:
1.
Directly intervening in the foreign exchange market under the basic
principles of the floating exchange rate regime in the event of further
intensifying of the financial turmoil in global markets that might have
negative impacts on the Turkish economy,
2.
Increasing transaction limits for banks in the Foreign Exchange and
Banknotes Markets,
3.
Extending borrowing maturities and reducing lending rates in the Foreign
Exchange Deposit Markets,
4.
Further reducing the FX required reserve ratio to a limited extent could be
considered.
72
Transition from YTL to TL
The transition process that started with the removal of six zeros from the Turkish
currency and putting the New Turkish lira banknotes and coins into circulation
was completed on 1 January 2009 with the removal of the prefix “New” from the
currency.
Value (%)
Amount (%)
Banknotes
75
73
Coins
20
15
* As of 17 April 2009
73
CENTRAL BANK OF THE
REPUBLIC OF TURKEY
PRESENTATION BEFORE THE COUNCIL OF MINISTERS /
THE PLANNING AND BUDGET COMMISSION OF THE
GREAT NATIONAL ASSEMBLY OF TURKEY
Durmuş YILMAZ
Governor
21 April 2009
74