Economic Outlook: Turkey & Arab World
Serkan ÖZCAN
AGM, Economic Research & Strategy
June 2012
Current Outlook for Turkey and MENA
2
New Stars: Turkey & MENA
Realizations and Expectations of GDP Growth Rate
2002-11 Avg. Growth Realizations
6%
Sub-Saharan Africa
5%
MENA
4%
Lagging countries
3%
G7
2%
Turkey
CIS
Leading countries
Advanced
economies
EU
Eurozone
1%
0%
0%
1%
2%
3%
4%
5%
2012-17 Avg. Growth Forecasts
Source: IMF, Odea
3
6%
7%
One Factor Two Problem: Surplus in MENA, Deficit in Turkey...
Gross National Savings/GDP (%)
45
40
35
30
Emerging economies
Advanced economies
MENA
Turkey
G7
CEE
40.9
36.8
25
20
15
12.5
10
1980-89 1990-99 2000-09
2010
2011
12.0
2012 2013-17
Current Account Balance/GDP (%)
15
10
5
14.5
Emerging economies
Advanced economies
MENA
Turkey
G7
CEE
13.2
9.4
0
1980-89 1990-99 2000-09
2010
2011
2012
2013-17
-5
-7.1
Source: IMF, Odea
-10
4
-9.9
-7.9
Budget surplus is expected only in MENA through high oil...
Robust Fiscal Performance
140%
Public Debt stock/GDP (2012-17
forecasts)
G7
120%
Eurozone
100%
80%
60%
Turkey
40%
MENA
20%
0%
-6%
-5%
-4%
-3%
-2%
-1%
0%
1%
Budget balance/GDP (2012-17 forecasts)
Source: IMF, Odea
5
2%
3%
4%
Risk premiums are improving in both MENA and Turkey...
Improving Risk Premiums
Change in current account balance/GDP
(2012-17 - 2006-11)
5%
CIS
4%
3%
EMs
2%
Turkey
MENA
1%
00%
0%
-2%
-1%
0%
1%
2%
-1%
Eurozone
-2%
Change in budget balance/GDP
(2012-17 - 2006-11)
Source: IMF, Odea
6
3%
4%
5%
But fiscal break-even oil prices have reached to new highs...
US$/barrel
Source: IMF calculations
7
Yemen
237
Bahrain
119
Iran
117
Libya
117
Iraq
112
Algeria
105
United Arab Emirates
84
Oman
77
Saudi Arabia
71
Kuwait
44
Qatar
42
Turkish exports to MENA doubled during 2006-12...
Trade Relationship Between Turkey and MENA Region
Turkish exports to MENA (Bn US$)
Turkish imports from MENA (Bn US$)
7.9 times in exports and 4 times in imports
in the last decade
40
35
34
29
30
25
20
16
17
15
10
6 7
5
0
2000
2001
2002
2003
2004
2005
Source: IMF, Odea
8
2006
2007
2008
2009
2010
2011
Despite recession in EU, trade volume reached record level
Trade volume between Turkey and MENA reached 20%, record level as of April 2012...
In the last decade, both of exports and imports increased above the growth rates of total
figures. Accordingly, share of MENA’s exports in total exports increased to 28% as of April
2012 from 15% in 2003, while the share of imports from MENA was 15%...
Turkish Exports to MENA (3MA, YoY Changes)
80%
-60%
-80%
-60%
9
Mar-12
Jun-11
Sep-10
Dec-09
Mar-09
Jun-08
Sep-07
Dec-06
Mar-03
Jun-02
Sep-01
-40%
Dec-00
Mar-12
Jun-11
Sep-10
Dec-09
Mar-09
-40%
Jun-08
-20%
Sep-07
-20%
Dec-06
0%
Mar-06
0%
Jun-05
20%
Sep-04
20%
Dec-03
40%
Mar-03
40%
Jun-02
60%
Sep-01
60%
Dec-00
80%
Imports from MENA
Mar-06
Exports to MENA
Total imports
Jun-05
100%
100%
Sep-04
Total exports
Dec-03
120%
Turkish Imports From MENA (3MA, YoY Changes)
%11 of Turkish Private Debt Received From MENA, Through
Foreign Branches and Affiliates of Local Banks...
Long-term External Private Debt Stock in Turkey - Country of Creditors (As a % total debt)
14%
13%
Bahrain
MENA
12%
11%
10.6%
10%
8.8%
9%
8%
Source: CBRT, Odea
10
Opportunities in Turkish Banking Sector
Banking Soundness Indicators (%, latest available month for 2011)
Qatar
Turkey
India
Saudi Arabia
Oman
Lebanon
Bahrain
Czech Rep.
Portugal
UAE
Kuwait
NPL ratio
2
2.6
2.7
3
3.3
3.8
4
5.2
7.3
8
8.5
CAR
16.1
16.6
13.1
17.1
15.5
12.1
19.6
15
9.8
20.8
19
Loan/Deposit
92
98
91
80
103
85
93
83
76
98
93
 Nominal GDP increased by almost 3.7
times during 2002-2011 and is expected
to grow by 1.5 times in the next 5 years.
 Moreover, GDP per capita in Turkey is
 Strongly capitalized and regulated banking sector…
 Lower NPL ratio...
GDP per capita (PPP, US$)
18,000
Turkey
16,000
Developing Asia
Emerging and developing economies
14,000
2X
of
EMs
MENA
12,000
CIS
10,000
8,000
6,000
almost 2 times of total emerging markets’.
4,000
2,000
Source: IMF, IIF, Odea
0
1980-89
11
1990-99
2000-09
2010
2011
2012
2013-17
What are the advantages of Turkey stock markets
for Arab Investors?
12
Huge Potential, High Profits...
Funds Raised through Istanbul Stock Exchange (ISE)
During 2000 to March 2012:
IPO&Right Issues US$ 37.1 billion
Cash Dividend
US$ 40.9 billion
25
20
US$ billion
IPO&Right issues
Cash Dividend
15
12.9
10
7.0
5
0
1986-89
1990-94
1995-99
Source: ISE, Odea
13
2000-04
2005-09
2010-2012/03
Market value/GDP ratio is expected to increase by 1.5 times in
the next five years with the project of Istanbul Finance Center...
Istanbul Stock Exchange (ISE) Market Value
1,800
80%
1,596
1,600
ISE Market value
US$ billion
1,400
Market value/GDP
90%
80%
70%
1,200
60%
43%
1,000
50%
800
40%
600
30%
472.6
400
20%
200
10%
0
0%
2003
Source: ISE, Odea
2004
2005
2006
2007
F: ISE forecast
14
2008
2009
2010
2015F
Risks
15
Recent sharp fall in oil prices to signal to downside risks...
There is a significant downward risks due to the recent sharp fall in oil prices...
Oil prices declined significantly by 25% in the past quarter due to the rise in downside risks
regarding global economic activity and risk aversion in financial markets. The recent sharp fall
in oil prices led to downward risks on growth rate in the remainder of the year, especially for
MENA’s oil exporters.
Oil Prices & Share of MENA Economies in World
140
120
Oil prices
MENA's share in world
100
Oil Prices & Share of Turkish Economy in World
5.2%
140
5.0%
120
4.8%
100
Turkey's share in world
80
60
4.4%
1.15%
40
0
4.0%
1.10%
20
1.05%
0
1.00%
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
4.2%
1.30%
1.20%
60
20
1.35%
1.25%
80
4.6%
40
1.40%
Oil prices
16
Is Risk Scenario Becoming New Base?
The Effects of an Euro Area Crisis (Difference from IMF growth forecasts*)
Source: IMF, Odea
* Peak deviation of output from the IMF April baseline under the downside scenario, increased bank and sovereign stress in the Eurozone.
17
Conclusion
18
A SWOT Analysis for Relationship of Turkey and Arab World
Strengths:
Weaknesses:
Huge potential
Social and political instability
Bright outlook
Regional spillover risks
Opportunities:
Threats:
Global liquidity
Fragile Eurozone economies
Robust fiscal balance
Downside risks on global
growth
Room for enhance
competitiveness
Rising break-even oil prices
Source: CBRT, Odea
19
Thank you for your attention...
Serkan ÖZCAN
AGM, Economic Research & Strategy
Serkan.Ozcan@OdeaBank.com.tr
June 2012
20