General Outlook on
Effects of 2008 Global Crisis on
Turkish Economy
Ramazan Karaca
Mahmut Kılıçoğlu
Alperen Koçsoy
Ergün Kurnalı
Yusuf İhsan Kurt
Zeynel Enes Mirza
Table of Content
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General aspects of 2008 crisis
Macroeconomic Indicators (Turkey)
Comparison with 1994 and 2001 Crisis
Banking and Finance
Measures to Counteract the Global Crisis
The Indicators of Financial Crisis
• Deregulation after Reagan Period.
• Two economic recessions in US economy: Dot-‐com bubble and
between 1997-‐2000
– Cisco’s stock value fall down by 86%. Amazon’s stock price from
107 to 7 $.
• September 11 terror attacks, 2001.
• These caused uncertainty and lower confidence level in
market.
• Attempts for solution: FED lowered the
Federal funds rate 11 times;
– 6.5% in May 2000 to 1.75% in December 2001
– Boosted the economy in terms of liquidity.
• 1%, the lowest rate was seen in 45 years, in June
2003
The History of Effective Federal Funds
Rate
The Outcomes of Low Fed Funds Rate
• Easier to borrow, because costs are much
more lower.
• Trending new investment areas such as
• Mortgage credits
• Collateralized debt obligations(CDOs), rated by
Moody’s and Standard & Poor’s
The Outcomes of Low Fed Funds Rate
• Prime Mortgages vs. Subprime Mortgages
• Naturally, subprime mortgages credits defaulted
• Mortgages became the property of banks. Banks put them for
sale, creating more supply than there is demand. Prices of
houses decreased, dramatically.
• Prime mortgage owners were paying much higher credits than
their houses’ values. They abandoned their houses.
• No agent in the economy didn't want these worthless houses.
• Thus, the whole financial system was frozen.
Macroeconomic Indicators
(Turkey)
* Source: TUIK
* 2003=100 taken as a base year
* Source: TUIK
*Source: TUIK
*Adjusted 1998 Prices
*Source: TUIK
*Source: TUIK
*2010=100
Current Account Balance
*Source: CBRT
Comparison with 1994 and 2001
Crises
• Turkey was hit harder by the global financial crisis of 20082009 than by any of the previous instances of a sudden stop
in capital inflows
Source: The Turkish Economy after the Global Financial Crisis∗ Dani Rodrik**
• In the crises of 1994 and 2001,the real exchange rate
depreciated on the order of 30-40 percent
• Depreciation in 2008 was short-lived than others. This
was clearly linked to the more rapid resumption of
capital inflows after the latest crisis
Source: The Turkish Economy after the Global Financial Crisis∗ Dani Rodrik**
• The decline in real GDP during the first quarter of
2009 was the worst on record since 1945.
• But the recovery in economic activity has also
been comparatively rapid.
Source: The Turkish Economy after the Global Financial Crisis∗ Dani Rodrik**
• The adverse effects on the real economy were
deeper than in the earlier crises.
Source: The Turkish Economy after the Global Financial Crisis∗ Dani Rodrik**
• Unemployment reached a record-breaking level, nearly
16 percent, in 2009:Q1.
• After from 2008 crises employment creation become
one of the most important goal in growth strategy.
Source: The Turkish Economy after the Global Financial Crisis∗ Dani Rodrik**
Banking and Finance
The banking sector of Turkey have not been
affected as much as the industrial sector and
SME’s.
The Reason: Strengtened structure of banking
sector after 2001 crisis
Source : BRSA
* 2015 data is up to September 31
Source: BRSA
*2015 data is up to September 31
• Source: BRSA
• *2015 data is up to September 31
• Source: BRSA
• *2015 data is up to September 31
• Source: BRSA, data is annually average
• *2015 data is up to September 31
• Source: BRSA
• *2015 data is up to September 31
• Source: BRSA
• *2015 data is up to September 31
Measures to Counteract
the Global Crisis
Measures to Counteract the Global Crisis
CB (Central Bank)
• Cut main policy interest rate to 6.5% in
November 2009
• Turkish lira required reserve ratio was cut
from 6% to 5% in October 2009.
• Foreign exchange buying auctions were
suspended between October 2008 and
August 2009
Measures to Counteract the Global Crisis
CB
• Additional foreign exchange liquidity
was injected via foreign exchange
selling auctions (October 2008,
March–April 2009)
• Required reserve ratios for foreign
currency deposits were lowered by 2
percentage points
• The limits of export rediscount credit
were extended and their conditions
eased
Measures to Counteract the Global Crisis
Government
• Implemented an anti–crisis package;
• Reductions in contributions to the
pension and health care funds, hike in
public servants’ salaries, temporary
cuts in special consumption and value
added taxes on selected goods
• ‘Credit and Guarantee Fund’ for the
financial sector to stimulate lending to
the private sector, especially to small and
medium–size enterprises.
Measures to Counteract the Global Crisis
Government
• In 2009 tobacco and fuel taxes were
raised and one–off arrangements to
increase tax revenues were
implemented.
• New measures included a voluntary
disclosure, tax peace and asset
repatriation programme.
References
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Source: The Turkish Economy after the Global Financial Crisis∗ Dani Rodrik**
Turkish Statistics Institution
Turkish Banking Regulation and Supervision Agency
Central Bank of Republic of Turkey
Federal Reserve
Rawdanowicz, Łukasz. (2010), “The 2008-09 Crisis in Turkey:Performance, Policy
Responses and Challenges forSustaining the Recovery”, OECD Economics
DepartmentWorking Papers, No. 819, OECD Publishing.
Thank You!
Ramazan Karaca
Mahmut Kılıçoğlu
Alperen Koçsoy
Ergün Kurnalı
Yusuf İhsan Kurt
Zeynel Enes Mirza