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WEBinar Nov. 25, 2009Rolf Danielsen

Turkey – weathering the crisis

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Crisis hit Turkey hard

Years of strong growth cut short by crisis

Domestic demand fell over a cliff

Expectation shock Consumption down

10% (Q1) Investments down 27%

(Quarterly, seasonally adjusted, constant prices)GDP

Expenditure Approach, Production Approach, Cal Adj, SA Expenditure Approach, Production Approach

Source: Reuters EcoWin

2000 2002 2004 2006 2008TR

Y (b

illio

ns)

15,0

17,5

20,0

22,5

25,0

27,5

30,0

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But the fall was cushioned

Domestic stimulus package– Reduced taxes,

increased soc. sec.– Subsidies for new car

purchases etc.– wage raise in public

sector Lower interest ratesSofter exchange rate

Spot Rates

EUR/TRY USD/TRY

Source: Reuters EcoWi n

jan

07

maj sep jan

08

maj sep jan

09

maj sep1,1

1,3

1,5

1,7

1,9

2,1

2,3

TRY/Euro

TRY/EUR

TRY/USD

4

Signs of recoveryLeading indicator

Sourc e: Reuters Ec oWin

2000 2002 20 04 2006 2008

Inde

x

70

80

90

1 00

110

Leading indicator: Exports prospects

New orders

Employment situation

Unemployment

Source: Reuters EcoWin

2007 2008 2009pe

rcen

t of t

otal

91011121314151617

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But not yet buoyant

Fiscal stimulus to expireGeneral import softnessBalance of payments

– Profit tax on T-bills!– Rising oil price

Higher interest ratesHigher fiscal deficit

GDP

-10

-5

0

5

10

15

2004 2006 2008 2010percent

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Risk: Government budget

deficit sharply up -09MEP in Sept. 2009 based on robust

recovery forecast interest sensitiveexplosive public

health costs

Budget balance

-7%-6%-5%-4%-3%-2%-1%0%

2004 2006 2008 2010

Perc

ent o

f GDP

History Forecast

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Upside: stronger banks

Weathered the crisis better than expected

No major bank-run: continued deposits growth

Credit expansion paused but picking up recently

Bad loans rising but still below 6%

Less crisis prone

Bad loans in banks

Past due loans, Lira

Past due loans FOREX

Special reserve for loans

Source: Reuters EcoWin

2000 2002 2004 2006 2008

TRY

(bill

ions

)

0,0

5,0

10,0

15,0

20,0

Bank loans & deposits

Credi t, Bank ing Sy s tem, Non-financ ia l s ec tor, depos i t money bank s ' loans , domes tic , to ta l

Money s upply M2, to ta l

Sourc e: Reuters Ec oWin

2006 2007 2008 2009

TL b

ill.

100

150

200

250

300

350

400

450

500

Deposits

Loans

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Political issues

Traditionally high event risk Battle between secularists and traditionalists EU membership Regional opportunities/challenges

– Kurds– Iraq/Iran– Armenia– Nabucco and gas hub

Where is Turkey heading – East or West?