MINISTRY of ECONOMY ECONOMIC OUTLOOK DECEMBER 2013 Economic Outlook is revized in the 1st and the 3rd weeks of the month. Recent Update: 19/12/2013

MINISTRY of ECONOMYMINISTRY of ECONOMY

ECONOMIC OUTLOOK

DECEMBER 2013DECEMBER 2013

Economic Outlook is revized in the 1st and the 3rd weeks of the month.

Recent Update: 19/12/2013

A- MACROECONOMIC OUTLOOKA- MACROECONOMIC OUTLOOK

B- FOREIGN TRADE OUTLOOKB- FOREIGN TRADE OUTLOOK

1) MERCHANDISE1) MERCHANDISE

2) SERVICES2) SERVICES

C- INVESTMENTS , FOREIGN CAPITAL and INCENTIVESC- INVESTMENTS , FOREIGN CAPITAL and INCENTIVES

D- FREE ZONES in TURKEYD- FREE ZONES in TURKEY

E- BILATERAL, REGIONAL, PLURILATERAL and MULTILATERAL TRADEE- BILATERAL, REGIONAL, PLURILATERAL and MULTILATERAL TRADE

OUTLINEOUTLINE

December 2013 Ministry of EconomyDecember 2013 Ministry of Economy 22

A- MACROECONOMIC OUTLOOKA- MACROECONOMIC OUTLOOK


Growth Forecasts for Selected Countries/Country Groups (%)Growth Forecasts for Selected Countries/Country Groups (%)

In 2012, Turkish economy grew by 2.2%. According to the IMF, Turkish Economy is expected to grow by 3.8% in

2013. In the third quarter of 2013 ,Turkish Economy grew by 4.4%. Turkish

economy expanded by 4.0% in the first three quarters of 2013.

Source: IMF, OECD, UN, WB


Turkey Euro Area US Brazil Russia India China2013 3.8 -0.4 1.6 2.5 1.5 3.8 7.62014 3.5 1.0 2.6 2.5 3.0 5.1 7.32013 3.6 -0.4 1.7 2.5 1.5 3.0 7.72014 3.8 1.0 2.9 2.2 2.3 4.7 8.22013 4.3 -0.6 2.0 2.9 2.3 5.7 7.72014 3.5 0.9 2.8 4.0 3.5 6.5 8.02013 3.4 -0.4 1.9 3.0 2.9 5.5 7.82014 3.8 1.1 2.6 4.2 3.5 6.1 7.7

IMF

OECD

WB

UN

Growth Forecasts for Selected Countries/Country Groups (%)

According to the IMF estimates, global trade volume of merchandise and services is expected to increase by 2.9% in 2013 and 4.9% in 2014.

According to the WTO estimates, global trade volume of merchandise and services is expected to increase by 2.5% in 2013 and 4.5% in 2014.

Forecasts for Merchandise and Services Trade Growth (%)Forecasts for Merchandise and Services Trade Growth (%)

Source: IMF and WTO


YearsAdvanced Economies

Emerging Markets

Advanced Economies

Emerging Markets

2013 2.7 3.5 1.5 5.0 2.92014 4.7 5.8 4.0 5.9 4.92013 1.5 3.6 -0.1 5.8 2.52014 2.8 6.3 3.2 6.2 4.5WTO

Forecasts for Merchandise and Services Trade Growth (%)Exports Imports World

Trade Volume

IMF

Economic Targets of 201Economic Targets of 20144-201-20166 Medium Term Program Medium Term Program

*Actual** Forecast (Medium Term Program, Ministry of Development – October 8, 2013)

Medium Term Program which covers 2014-2016 period aims to reduce the current account deficit gradually and increase the growth rate by minimizing the effects of global uncertainty.


2012* 2013* 2014* 2015* 2016*GDP (Billion $, Current Prices) 786 823 867 928 996GDP Per Capita ($) 10497 10,818 11,277 11,927 12,670Real GDP Growth 2.2 3.6 4.0 5.0 5.0Unemployment Rate (%) 9.2 9.5 9.4 9.2 8.9Tourism Income (Billion $) 25.7 29.0 31.0 32.0 34.5Current Account Balance (Billion $) -47.8 -58.8 -55.5 -55.0 -55.0Current Account Balance / GDP (%) -6.1 -7.1 -6.4 -5.9 -5.5

Real GDP Growth of Selected Countries/Country Groups (2012)Real GDP Growth of Selected Countries/Country Groups (2012)

Turkish Economy expanded by 2.2% in 2012.Turkish Economy grew by 3.0%, 4.5% and 4.4% in the first three quarters of 2013, respectively.

Source: TURKSTAT, IMF


Euro Area

Annual Economic Growth Rates (2002-2012)Annual Economic Growth Rates (2002-2012)

* Forecast, Medium Term Programme Source:TURKSTAT

Turkey has recovered fast from the global financial crisis. It is among the least affected countries from current global economic uncertainties.

Mean annual growth rate between 2002 and 2012 was 5.2%. Real GDP growth for 2012 realized as 2.2%.


GDP Per CapitaGDP Per Capita

Source: Dollar value is from TURKSTAT, PPP GNI value from World Bank

Since 2002 GDP per capita has tripled from 3,492 USD to 10,497 USD. According to Purchasing Power Parity (PPP) GNI per capita surpassed 18 thousand USD.


Capacity Utilization Ratio (%)Capacity Utilization Ratio (%)

Source: TURKSTAT

Capacity utilization ratio realized as 75.6 % in November 2013.


Industrial Production IndexIndustrial Production Index

Source: TURKSTAT

Industrial production index decreased by 0,5% year-over-year to 111.70 in November 2013 (2010=100).


Inflation (Annual Percent Change)Inflation (Annual Percent Change)

Annual inflation in 2012 realized as 6.16%. Inflation was 7.32 % in November 2013.

Source: TURKSTAT


Real Effective Foreign Exchange Rate (2003=100)Real Effective Foreign Exchange Rate (2003=100)

Compared to the previous month, as of November 2013, Turkish Lira has depreciated by 0.74% in terms of the CPI-based real effective exchange rate and appreciated by 0.21% in terms of the PPI- based real effective exchange rate.

Source: CBRT


Total Credits and Consumer Credits (Billion TL)Total Credits and Consumer Credits (Billion TL)

Credits and specifically consumer credits increased in parallel to the growing domestic demand.

Total credits increased slightly on a monthly basis in October 2013.


Source: BRSA

CDS Premiums (Dec 18th, 2013)CDS Premiums (Dec 18th, 2013)

Source: DB Research* Higher CDS premiums indicate higher risk levels.

CDS premium of Turkey indicates a medium level of risk.


Financial MarketsFinancial Markets

Comparing to previous year, total assets of the banking sector increased by 23.1% and reached 1,636 trillion TL in October 2013.

Capital Adequacy Ratio of Turkish Banking Sector is 15.8% in September 2013.


Source: BRSA

Data on Banking Sector 2012 October 2013 October

Number of Banks 49 49

Number of Domestic Branches 10,891 11,766

Number of Foreign Branches 79 83

Number of Total Domestic Personnel Employed 200,022 212,077

Total Assets (Million TL) 1,328,642 1,636,094

Total Equities (Million TL) 172,588 193,510

Net Profit or Loss (Million TL) 19,438 21,701

Nonperforming Loans (Gross) / Cash and Cash Equivalents (%) 2.96 2.79

Net Profit or Loss / Average Equities (%) 13.08 12.42

Liquid Assets with 12 Months of Maturity / Total Assets (%) 70.59 75.32

Capital Adequacy Ratio (%) 16.86 15.8

EU Defined Budget Deficit/ GDP (%)EU Defined Budget Deficit/ GDP (%)

EU defined general government budget deficit/GDP ratio was 2.6% in Turkey in 2010 and Turkey satisfied the Maastricht criteria of 3%. Turkey also outperformed 22 EU Countries.

Central government budget deficit/GDP ratio was 2.0% in Turkey in 2012. In January-November 2013 period, central government budget deficit was

1,2 billion TL compared to 13,3 billion TL in the same period of 2012.

* 2010


Source: Eurostat

Government Debt / GDP (%)Government Debt / GDP (%)

Debt/GDP ratio of Turkey was 36.2% in 2012, which was below the level in 25 EU Countries and the Maastricht Criteria (60%).


Source: Eurostat

Unemployment Rates (%)Unemployment Rates (%)

In September 2013, the unemployment rate was 9.9%. Seasonally adjusted unemployment rate was 10.2%.

Seasonally adjusted unemployment rate in Euro Area was 12.1% and 10,9% in (EU28) in October 2013. In terms of unemployment ratio Turkey outperformed 13 EU countries according to current data.

After Russia, Germany, England and France, Turkey has the 5th largest labor force among the European countries. (2011, World Bank)

Source: TURKSTAT


Potential of Population (2011)Potential of Population (2011)

Source: World Bank (2011), TURKSTAT (2012)

Turkey has a population of 75.6 million in which half of the population is under the age of 30.1.

Growth rate of population is 1.2% in Turkey, 0.3% in EU Countries and -0.1% in Germany.

2020December 2013 Ministry of EconomyDecember 2013 Ministry of Economy

Cell phone penetration rate in households: 93.2% (2012)

Internet access rate in households: 47.2% (2012) Internet access rate in enterprises: 92.5% (2012) PC penetration rate in households: 31.8% (2012) Laptop penetration rate in households: 27.1% (2012) Digital camera penetration rate in households: 27.1%

(2012) Printer penetration rate in households: 14.0% (2011) 1 of each 5 people owns a vehicle. (2011)

Growing Dynamism in Turkey's Domestic MarketGrowing Dynamism in Turkey's Domestic Market


B- FOREIGN TRADE OUTLOOKB- FOREIGN TRADE OUTLOOK


I) MERCHANDISEI) MERCHANDISE


Targets in Merchandise TradeTargets in Merchandise Trade

* Actual (Source: TURKSTAT)**Forecast: Medium Term Programme, Ministry of Development, 2014-2016)*** Turkish Exports Strategy for 2023


(Billion $) 2012* 2013** 2014** 2015** 2016** 2023***Exports 152.5 153.5 166.5 184 202.5 500Imports 236.5 251.5 262 282 305 625Volume of trade 389 405 428.5 466 507.5 1125Balance of trade -84 -98 -95.5 -98 -102.5 -125Exports/Imports (%) 64.5 61.0 63.5 65.2 66.4 80.0

Turkey's Share in Global Merchandise Exports (%)Turkey's Share in Global Merchandise Exports (%)

Turkey’s share in global merchandise exports was %0.83 in 2012.


2626

Foreign Trade Volume/GDP (%)Foreign Trade Volume/GDP (%)

The ratio of foreign trade volume to GDP was 49.5% in 2012. Turkey’s integration to the international trade system is eminent.

December 2013 Ministry of EconomyDecember 2013 Ministry of Economy

Foreign Trade Developments Foreign Trade Developments

In January-October period of 2013 compared to same period of 2012, exports decreased by 1.2% and imports increased by 5.8% respectively.

Source: Ministry of Economy


2011 - 2012 / January-October 2012 - 20132011 - 2012 / January-October 2012 - 2013

* Energy corresponds to Chapter 27.

2011 2012 2012 / (JAN - OCT) 2013 / (JAN - OCT)Change (%) 2012/2013

Export 134.9 152.5 126.1 124.5 -1.2Energy Export 6.5 7.7 6.5 5.6 -14.5Gold Export 1.5 13.3 11.9 3.2 -73.3

Import 240.8 236.5 195.8 207.1 5.8Energy Import 54.1 60.1 49.6 45.9 -7.5Gold Import 6.1 7.6 7.0 12.9 85.0

Foreign Trade Volume 375.7 389.0 321.9 331.6 3.0Foreign Trade Balance -105.9 -84.1 -69.7 -82.6 18.5Balance excl. Energy -58.4 -31.7 -26.5 -42.2 59.1Export/Import (%) 56.0 64.5 64.4 60.1 *

Annual (Billion $) Periodic (Billion Dollar)

Monthly Exports/Imports Monthly Exports/Imports


In October 2013 compared to same period of 2012, exports have decreased by 8.2% and realized as 12.1 billion dollar and imports have increased by 3.7% up to the level of 19.5 billion dollar.

Monthly Exports and Imports, Billion Dollar

Source: TURKSTAT

Distribution of Foreign Trade in Broad Economic Categories Distribution of Foreign Trade in Broad Economic Categories

EXPORT

2929

IMPORT


Source: TURKSTAT

Source: TURKSTAT

2011/2012 2012/20132011 2012 Değ.% 2012 2013 Change %

Investment Goods 14,192 13,734 -3.2 10,095 12,628 11.2 25.1Intermediate Goods 67,942 82,656 21.7 62,155 62,050 55.2 -0.2Consumption Goods 52,219 55,556 6.4 40,294 49,326 43.8 22.4Others 555 516 -7.0 368 536 0.5 45.7TOTAL 134,907 152,462 13.0 112,912 124,540 110.7 10.3

(Million $) Annual Periodic (January-Oct) Jan-Oct % Share

2011/2012 2012/20132011 2012 Değ.% 2012 2013 Change %

Investment Goods 37,271 33,925 -9.0 24,806 29,771 15.9 20.0Intermediate Goods 173,140 174,930 1.0 131,906 151,983 81.0 15.2Consumption Goods 29,692 26,699 -10.1 19,462 24,801 13.2 27.4Others 739 990 34.0 809 548 0.3 -32.3TOTAL 240,842 236,545 -1.8 176,983 207,103 110.4 17.0

Consumption Goods Annual Periodic (January-Oct) Jan-Oct % Share

Main Export Items Main Export Items

Source: TURKSTAT

3030

* Percent change is related to the annual change in exports in 2013.


CHANGE % 2012 2013 2012 2013 2012 2013 2012/2013

1 87 VEHICLES OTHER THAN RAILWAY OR TRAMWAY 12,368 13,841 11,509 13,558 859 283 11.92 84 NUCLEAR REACTORS, BOILERS, MACHINERY AND MECHANIC AL APPLIANCES 9,892 10,600 21,315 24,488 -11,423 -13,888 7.23 72 IRON AND STEEL 9,640 8,296 16,605 15,400 -6,965 -7,104 -13.94 85 ELECTRICAL MACHINERY AND EQUIPMENT 7,659 7,712 13,207 14,362 -5,547 -6,650 0.75 61 ARTICLES OF APPAREL AND CLOTHING ACCESSORIES, KNI TTED OR CROCHETED 6,930 7,583 709 782 6,221 6,801 9.46 71 NATURAL OR CULTURED PEARLS, PRECIOUS OR SEMI-PREC IOUS STONES, PRECIOUS METALS 14,338 6,196 7,700 13,753 6,637 -7,557 -56.87 27 MINERAL FUELS, MINERAL OILS AND PRODUCTS OF THEIR DISTILLATION 6,493 5,550 49,644 45,918 -43,150 -40,368 -14.58 73 ARTICLES OF IRON OR STEEL 4,918 5,061 1,888 2,270 3,030 2,791 2.99 62 ARTICLES OF APPAREL AND CLOTHING ACCESSORIES, NOT KNITTED OR CROCHETED 4,510 4,756 1,290 1,559 3,219 3,196 5.4

10 39 PLASTICS AND ARTICLES THEREOF 4,160 4,572 10,406 11,624 -6,246 -7,052 9.980,908 74,168 134,273 143,716 -53,365 -69,547 -8.3

126,103 124,539 195,770 207,104 -69,666 -82,565 -1.2

Periodic (January-October) Million Dolar

Rank Code Description of ChapterEXPORT IMPORT BALANCE

LIST TOTALTOTAL

Main Import Items Main Import Items

Source: TURKSTAT

3131

* Percent change is related to the annual change in exports in 2013.


CHANGE %2012 2013 2012 2013 2012 2013 2012/2013

1 27 MINERAL FUELS, MINERAL OILS AND PRODUCTS OF THEIR DISTILLATION 49,644 45,918 6,493 5,550 -43,150 -40,368 -7.52 84 NUCLEAR REACTORS, BOILERS, MACHINERY AND MECHANIC AL APPLIANCES; PARTS THEREOF 21,315 24,488 9,892 10,600 -11,423 -13,888 14.93 72 IRON AND STEEL 16,605 15,400 9,640 8,296 -6,965 -7,104 -7.34 85 ELECTRICAL MACHINERY AND EQUIPMENT 13,207 14,362 7,659 7,712 -5,547 -6,650 8.75 71 NATURAL OR CULTURED PEARLS, PRECIOUS OR SEMI-PREC IOUS STONES, PRECIOUS METALS 7,700 13,753 14,338 6,196 6,637 -7,557 78.66 87 VEHICLES OTHER THAN RAILWAY OR TRAMWAY 11,509 13,558 12,368 13,841 859 283 17.87 39 PLASTICS AND ARTICLES THEREOF 10,406 11,624 4,160 4,572 -6,246 -7,052 11.78 29 ORGANIC CHEMICALS 4,256 4,416 544 477 -3,712 -3,939 3.89 90 OPTICAL, PHOTOGRAPHIC, CINEMATOGRAPHIC, MEDICAL OR SURGICAL INSTRUMENTS 3,242 3,674 443 532 -2,799 -3,143 13.3

10 30 PHARMACEUTICAL PRODUCTS 3,204 3,392 497 581 -2,707 -2,811 5.9141,088 150,586 66,034 58,358 -75,053 -92,229 6.7195,770 207,104 126,103 124,539 -69,666 -82,565 5.8

Periodic (January-October) Million Dollar

Rank Code Description of ChapterIMPORT EXPORT BALANCE

LIST TOTAL TOTAL

Main Export Items (Annual) Main Export Items (Annual)

Source: TURKSTAT


CHANGE % 2011 2012 2011 2012 2011 2012 2011/2012

1 71 PEARLS, PRECIOUS STONES, PRECIOUS METALS AND ARTICLES THEREOF 3,739 16,325 7,022 8,529 -3,284 7,796 336.62 87 VEHICLE OTHER THAN RAILWAY OR TRAMWAY ROLLING-STOCK, PARTS THEREOF 15,803 15,148 17,184 14,514 -1,381 634 -4.13 84 BOILERS, MACHINERY AND MECHANICAL APPLIANCES, PARTS THEREOF 11,561 11,999 27,111 26,316 -15,550 -14,317 3.84 72 IRON AND STEEL 11,225 11,332 20,424 19,642 -9,199 -8,310 1.05 85 ELECTRICAL MACHINERY AND EQUIPMENT: PARTS THEREOF 8,874 9,373 16,835 16,280 -7,961 -6,907 5.66 61 KNITTED AND CROCHETED GOODS AND ARTICLES THEREOF 8,386 8,419 1,085 843 7,301 7,575 0.47 27 MINERAL FUELS, MINERALS OILS AND PRODUCT OF THEIR DISTILLATION 6,539 7,708 54,118 60,117 -47,579 -52,409 17.98 73 ARTICLES OF IRON AND STEEL 5,748 6,093 2,521 2,367 3,227 3,726 6.09 62 NON KNITTED AND CROCHETED GOODS AND ARTICLES THEREOF 5,124 5,431 1,874 1,498 3,250 3,933 6.010 39 PLASTIC AND ARTICLES THEREOF 4,580 5,013 12,579 12,505 -7,998 -7,492 9.4

81,580 96,842 160,753 162,612 -79,173 -65,770 18.7134,907 152,462 240,842 236,545 -105,935 -84,083 13.0

LIST TOTALTOTAL

Annual (Million Dolar)

Rank Code Description of ChapterEXPORT IMPORT BALANCE

Main Import Items (Annual) Main Import Items (Annual)

Source: TURKSTAT


CHANGE %2011 2012 2011 2012 2011 2012 2011/2012

1 27 MINERAL FUELS, MINERALS OILS AND PRODUCT OF THEIR DISTILLATION 54,118 60,117 6,539 7,708 -47,579 -52,409 11.12 84 BOILERS, MACHINERY AND MECHANICAL APPLIANCES, PARTS THEREOF 27,111 26,316 11,561 11,999 -15,550 -14,317 -2.93 72 IRON AND STEEL 20,424 19,642 11,225 11,332 -9,199 -8,310 -3.84 85 ELECTRICAL MACHINERY AND EQUIPMENT, PARTS THEREOF 16,835 16,280 8,874 9,373 -7,961 -6,907 -3.35 87 VEHICLE OTHER THAN RAILWAY OR TRAMWAY ROLLING-STOCK, PARTS THEREOF 17,184 14,514 15,803 15,148 -1,381 634 -15.56 39 PLASTIC AND ARTICLES THEREOF 12,579 12,505 4,580 5,013 -7,998 -7,492 -0.67 71 PEARLS, PRECIOUS STONES, PRECIOUS METALS AND ARTICLES THEREOF 7,022 8,529 3,739 16,325 -3,284 7,796 21.58 29 ORGANIC CHEMICALS 5,504 5,065 545 647 -4,959 -4,418 -8.09 90 OPTICAL, PHOTOGRAPHIC, CINEMATOGRAPHIC, MEASURING CHECKING, PRECISION 4,116 4,056 448 555 -3,668 -3,501 -1.510 30 PHARMACEUTICAL PRODUCTS 4,697 3,996 567 662 -4,131 -3,334 -14.9

169,591 171,020 63,882 78,763 -105,709 -92,257 0.8240,842 236,545 134,907 152,462 -105,935 -84,083 -1.8TOTAL

Description of ChapterRank Code

Annual (Million Dollar)IMPORT EXPORT BALANCE

LIST TOTAL

Main Export Partners (Share,%)

Main Trade Partners (JanuaryMain Trade Partners (January-October -October 20120133))

Main Import Partners (Share,%)

Source: TURKSTAT


Exports by RegionsExports by Regions

Source: TURKSTAT


2012 Share (%) 2013 Share (%) Change(%) 2012 Share (%) 2013 Share (%) Change(%) A- EU (28) 5,296 40.1 5,305 43.8 0.2 48,663 38.6 51,547 41.4 5.9 B- FREE ZONES IN TURKEY 180 1.4 175 1.4 -2.7 1,913 1.5 1,989 1.6 4.0 C- OTHER COUNTRIES 7,715 58.5 6,625 54.7 -14.1 75,527 59.9 71,004 57.0 -6.0 1- OTHER EUROPE 1,655 12.5 1,250 10.3 -24.5 11,579 9.2 11,664 9.4 0.7 2- AFRICA 1,193 9.0 928 7.7 -22.2 10,995 8.7 11,677 9.4 6.2 North Africa 846 6.4 647 5.3 -23.5 7,760 6.2 8,294 6.7 6.9 Other Africa 347 2.6 281 2.3 -19.1 3,235 2.6 3,383 2.7 4.6 3- AMERICA 859 6.5 726 6.0 -15.6 7,948 6.3 8,120 6.5 2.2 North America 620 4.7 517 4.3 -16.7 5,539 4.4 5,492 4.4 -0.8 Central America And Caraips 48 0.4 61 0.5 27.2 658 0.5 872 0.7 32.6 South America 191 1.5 148 1.2 -22.6 1,752 1.4 1,756 1.4 0.2 4- ASIA 3,957 30.0 3,669 30.3 -7.3 44,511 35.3 38,985 31.3 -12.4 Near And Middle Eastern 3,013 22.8 2,721 22.5 -9.7 35,920 28.5 29,154 23.4 -18.8 Other Asia 944 7.2 948 7.8 0.4 8,591 6.8 9,831 7.9 14.4 5- AUSTRALIA AND NEW ZEALAND 46 0.3 47 0.4 3.6 401 0.3 442 0.4 10.3 6- OTHER COUNTRIES AND REGIONS 4 0.0 5 0.0 14.3 92 0.1 115 0.1 25.1

TOTAL 13,191 100 12,105 100 -8.2 126,103 100 124,539 100 -1.2

(Million $)October January-October

ImportImports by Regionss by Regions

Source: TURKSTAT


2012 Share (%) 2013 Share (%) Change(%) 2012 Share (%) 2013 Share (%) Change(%) A- EU (28) 7,325 39.0 7,428 38.1 1.4 71,820 36.7 75,587 36.5 5.2 B- FREE ZONES IN TURKEY 83 0.4 98 0.5 18.0 860 0.4 1,040 0.5 20.9 C- OTHER COUNTRIES 11,378 60.6 11,953 61.4 5.1 123,090 62.9 130,477 63.0 6.0 1- OTHER EUROPE 2,941 15.7 2,825 14.5 -3.9 31,077 15.9 33,838 16.3 8.9 2- AFRICA 519 2.8 529 2.7 1.9 4,909 2.5 5,017 2.4 2.2 North Africa 350 1.9 331 1.7 -5.4 2,706 1.4 2,975 1.4 9.9 Other Africa 169 0.9 198 1.0 17.1 2,203 1.1 2,042 1.0 -7.3 3- AMERICA 1,517 8.1 1,482 7.6 -2.3 17,232 8.8 16,009 7.7 -7.1 North America 1,099 5.9 1,017 5.2 -7.4 13,053 6.7 11,826 5.7 -9.4 Central America And Caraips 97 0.5 138 0.7 42.5 842 0.4 1,132 0.5 34.5 South America 321 1.7 327 1.7 1.8 3,337 1.7 3,050 1.5 -8.6 4- ASIA 5,111 27.2 6,038 31.0 18.1 59,201 30.2 63,539 30.7 7.3 Near And Middle Eastern 1,206 6.4 1,516 7.8 25.7 18,339 9.4 18,615 9.0 1.5 Other Asia 3,905 20.8 4,522 23.2 15.8 40,862 20.9 44,924 21.7 9.9 5- AUSTRALIA AND NEW ZEALAND 36 0.2 59 0.3 64.6 774 0.4 1,083 0.5 39.8 6- OTHER COUNTRIES AND REGIONS 1,254 6.7 1,020 5.2 -18.7 9,896 5.1 10,992 5.3 11.1

TOTAL 18,787 100 19,480 100 3.7 195,770 100 207,104 100 5.8

(Million $)October January-October

Tariff RatesTariff Rates

Source: WTO Tariff Profiles, 2012


2) SERVICES2) SERVICES


Tourism: Besides increasing the number of tourist arrivals, creating a structure that improves service quality, targets high-income groups by diversifying marketing channels, preserves natural capital and sustainability, and stimulates those types of tourism where Turkey has comparative advantages

Construction, Engineering-Architecture, Technical Consultancy and Contracting Services: Establishing a structure that fits Turkey’s economic and social needs, that is compatible with high technology and international rules, that is sensitive to environment, that creates high value added, high foreign exchange inflow and high employment, that grants high service quality, and that relies on qualified human and physical capital

Commercial Services: Increasing productivity and commercial trade volume in a competitive way, and to encourage technology and innovation

Targets in ServicesTargets in Services


Turkey's Share in Global Services Exports (%)Turkey's Share in Global Services Exports (%)

Source: WTO

Turkey’s share in global exports of services was 0.99% in 2012.


Tourism Statistics (Quarterly)Tourism Statistics (Quarterly)


Tourists visited (Thousand), Source: TURKSTAT

Turkey ranks as the 6th in the world and the 4th in Europe among the most favourite tourism destinations.

Turkey’s income per tourist increased by 2.6% in 2012 compared to 2011.

Contracting Services AbroadContracting Services Abroad

4242

38 out of the world’s top 250 contracting companies are Turkish.

Turkey ranks as the 2nd country (following China) in terms of the number of top contracting companies.

Contributions to the overall economic performance: Creating foreign exchange inflow, exports, employment, technology transfer; adding to the machinery stock, facilitating internationalization


Regional Breakdown of Projects(%)

Years Projects CountriesProject Volume

(Million $)

Cum. Project Volume

(Million $)

Avr. Project Volume

(Million $)1971-2001 2010 60 43.294 43.294 22

2002 131 32 2.571 45.865 202003 277 36 4.503 50.368 162004 426 39 11.319 61.687 272005 408 34 12.328 74.015 302006 518 36 24.236 98.251 472007 579 44 25.278 123.529 442008 628 40 24.853 148.382 402009 487 45 21.725 170.107 452010 594 50 22.724 192.831 382011 521 49 20.237 213.068 392012 489 48 27.092 240.160 552013 235 37 23.653 263.813 101

Last updated on December 2013

Logistics 2012Logistics 2012

4343

Europe’s biggest truck fleet 45 thousands trucks and 1,420 companies Almost 1.1 million flights in 2012 2.4 million tonnes freight and 130 million passengers 25. biggest fleet in the world 48 airports and 76 ports Total length of divided highways will reach 15 thousand

kilometers. High-speed railway projects are carried out rapidly.


TurkeyTurkey’s ’s EnergyEnergy Perspective Perspective

4444

Turkey’s Energy Corridor Concept

Strategy is to act as a transit country for secure & commercially viable projects and to be an energy terminal. e.g. TANAP (Trans-Anatolian Natural Gas Pipeline) Project

In the long-term planning work, Turkey foresees to achieve the following targets in 2023 in the field of energy;

To be able to make complete use of its potential of indigenous coal and hydro resources,

To make maximum use of renewable resources, To incorporate nuclear energy into electricity generation To secure rapid and continuous improvement in energy

efficiency.

Some ongoing important energy projects that will help Turkey’s Energy Security;

•Mersin Akkuyu Nuclear Power Plant-Russia

•Sinop Nuclear Power Plant-Japan


C- INVESTMENTS, FOREIGN CAPITAL and C- INVESTMENTS, FOREIGN CAPITAL and INCENTIVESINCENTIVES


Investment Climate in TurkeyInvestment Climate in Turkey

4646

1- SOUND ECONOMIC PERFORMANCE 6- CENTRAL LOCATION2- YOUNG and DYNAMIC POPULATION

7- ENERGY CORRIDOR and TERMINAL of EUROPE

3- QUALIFIED and COMPETITIVE LABOR FORCE

8- LOW TAX RATES and INCENTIVE FACILITIES

4- LIBERAL and INNOVATIVE INVESTMENT CLIMATE

9- CUSTOMS UNION with EU and OPEN ECONOMY

5- INFRASTRUCTURE 10- DOMESTIC MARKET

10 REASONS TO INVEST IN TURKEY


Time Time RRequired to equired to SStart a tart a BBusinessusiness

The required time to start a business is 6 days in Turkey.

Source: Invest In Turkey


Skilled Labour AvailabilitySkilled Labour Availability

Scoring is between 0 and 10.

Source: Invest In Turkey


The Sectoral Breakdown of Foreign InvestmentsThe Sectoral Breakdown of Foreign Investments

Source: CBRT

*January-October

DecemberDecember 2013 Ministry of Economy 2013 Ministry of Economy 5050

(Million $) 2011 2012 2012* 2013*AGRICULTURE 32 43 41 36INDUSTRIAL SECTORS 7,965 5,420 4,783 2,718 Mining and Quarrying 146 213 193 218 Manifacturing 3,573 4,283 3,810 1,266 Production and Distribution of Electricity, Gas, 4,244 924 780 1,232SERVICES SECTOR 8,058 5,098 3,967 4,655

TOTAL 16,055 10,561 8,791 7,409

Breakdown of Foreign Investments by CountryBreakdown of Foreign Investments by Country

Source: CBRT

5151

* January-October

2011 2012 2012* 2013*1 Germany 665 491 389 1,7132 Netherlands 1,425 1,226 952 8493 Austria 2,418 1,519 1,423 6544 train 50 46 2 4685 Spain 2,251 193 113 4656 Japan 231 106 94 4587 Lebanon 45 315 315 3698 U.S. 1,402 439 331 3039 Luxembourg 555 1,183 1,043 209

10 Saudi Arabia 8 439 339 20511 Kuwait 43 271 63 20412 France 999 86 71 20113 Azerbaijan 1,266 338 318 19014 Swiss 233 454 320 18215 Russia 762 11 8 16916 England 904 2,004 1,966 12117 Italy 111 154 132 11418 Bahrain 5 131 110 7819 United Arab Emirates 89 52 27 7120 Thailand 0 1 0 57

13,462 9,460 8,016 7,13716,055 10,561 8,791 7,409

LIST TOTALTOTAL

Million $

DecemberDecember 2013 Ministry of Economy 2013 Ministry of Economy

Investment Incentive SystemInvestment Incentive System

The current investment incentive system of Turkey is structured in four sub systems:

General Investment Incentive System Regional Investment Incentive System Investment Incentive System for Big Scale

Projects Encouraging the Strategic Investments


Investment IncentivesInvestment Incentives

Source: General Directorate of Incentive Implementation and Foreign Investment

5353

*January-October

*January-October

2011 3,367 40,347 93,9352012 3,063 34,930 96,6472013 3,985 63,962 142,697

Certificates Issued

Amount of Fixed Investments (Million TL)

Potential Employment

(People)

Region I Region II Region III Region IV Region V Region VI Various TOTAL2011 1,092 664 511 450 334 306 10 3,3672012 1,093 558 508 354 232 312 6 3,0632013 1,446 652 549 429 392 494 23 3,985

CERTIFICATES ISSUED


D - FREE ZONES IN TURKEYD - FREE ZONES IN TURKEY


Tax advantages for manufacturers Medium-and long-term investment view Availability to transfer profits Commercial facilities Exemption from customs duties Acquisition of the documents relating to the free movement of goods under

the scope of Customs Union with the EU Principle of equality No time restrictions Flexibility to adjust to the market needs and conditions Reliable inflation accounting Market access to domestic and foreign markets Reduced bureaucratic procedures and dynamic business management Strategic advantages Affordable and compatible infrastructure Supply chain opportunities

The Advantages of Free Zones for UsersThe Advantages of Free Zones for Users


Free Zones in TurkeyFree Zones in Turkey

55,938 people have been employed in Free Zones of Turkey in 2012.


Trade Flows of Free ZonesTrade Flows of Free Zones

In 2012 total trade volume of the Free Zones reached to 23.1 billion dollars, increasing 1.8% annually.

Source: General Directorate of Free Zones, Foreign Investments and Services

5757

Million $ 2008 2009 2010 2011 2012From Domestic Market to Free Zones 3,195 2,177 2,295 2,668 2,971From Free Zones to Abroad 5,874 4,914 4,361 6,924 7,070From Abroad to Free Zones 8,248 5,493 6,626 7,253 7,258From Free Zones to Domestic Market 7,262 5,174 5,291 5,801 5,754

TOTAL TRADE VOLUME 24,578 17,757 18,572 22,646 23,053


Concentration in Free Zones by IndustriesConcentration in Free Zones by Industries

Source: General Directorate of Free Zones, Foreign Investments and Services

Istanbul Ataturk Airport FZ Services and SoftwareAntalya FZ Yacht-building, Medical EquipmentKocaeli FZ Ship-buildingAvrupa FZ Ready-WearMersin FZ Ready-WearBursa FZ Automotive sub-industriesIzmir FZ LeatherTUBITAK-MAM FZ R&D ActivitiesAdana-Yumurtalik FZ Ship Repair and Maintenance


E - E - BBIILATERAL, REGLATERAL, REGIIONAL, ONAL, PLURILATERAL and PLURILATERAL and MULTMULTIILATERAL LATERAL

TRADETRADE


Trade Relationships of Turkey with OthersTrade Relationships of Turkey with Others

Bilateral Trade Relationships of Turkey

Europe, Asia-Pacific, Eurasia, Middle East and North Africa, Sub-Saharan Africa, Americas

Regional and Multiple Trade Relationships of Turkey

EU, ECO, D8, BSEC, OIC, COMCEC

Multilateral Trade Relationships of Turkey

WTO, OECD, G20


Regional Breakdown of ExportsRegional Breakdown of Exports

Source: TURKSTAT * January-October** Except Lebanon and Kosovo

In January-October period of 2013, our exports to EFTA countries decreased by 33.6% annually. The annual increase of our exports to Turk Republics in the same period was 19.2% and Turk Republics became the fastest growing export destination of the regions above.

6161

(Million $) 2011 2012 Change %Share % (2012)

2012* 2013* Change %Share % (2013*)

CIS 13,377 15,075 12.7 9.9 12,352 13,914 12.7 11.2EFTA 1,887 2,601 37.8 1.7 2,101 1,394 -33.6 1.1Economic Cooperation Organisation 9,292 16,563 78.3 10.9 14,790 10,052 -32.0 8.1Organization of Islamic Conference 37,325 55,218 47.9 36.2 46,461 40,585 -12.6 32.6Black Sea Economic Cooperation 17,768 18,791 5.8 12.3 15,403 16,662 8.2 13.4FTA Countries** 13,602 14,576 7.2 9.6 12,530 12,065 -3.7 9.7OECD 67,114 66,290 -1.2 43.5 54,356 56,174 3.3 45.1Turkic Republics 5,040 5,841 15.9 3.8 4,798 5,721 19.2 4.6

TOTAL 134,907 152,462 13.0 100.0 126,103 124,539 -1.2 100.0


Chronological Evolution of the Relationship between Turkey and the EUChronological Evolution of the Relationship between Turkey and the EU

12 September 1963: Ankara Agreement 23 November 1970: The signing of the Additional Protocol 1 January 1973: Additional Protocol to come into force 14 April 1987: Turkey’s Application for Membership 6 March 1995: The Association Council Decision Establishing the

Customs Union 10-11 December 1999: Recognition of the Candidate Status of

Turkey at the Helsinki Summit 8 March 2001: The first Accession Partnership Document issued 17 December 2004: European Council decision to start

Negotiations with Turkey in Brussels Summit 3 October 2005: Start of the Negotiations between Turkey and

the EU 20 October 2005: Start of the Screening Process 13 October 2006: End of the Screening Process


EU Accession Negotiations Current StatusEU Accession Negotiations Current Status

6363

Negotiations for 13 chapters were opended, 1 chapter was temporarily closed up to the present.

Temporarily Closed (25) Science and Research (12 June 2006)

Opened (13 Chapters)

(4)Free Movement of Capital (18 December 2008)(6)Company Law (12 June 2008)(7)Intellectual Property Law (12 June 2008)(10)Information Society and Media (18 December 2008)(12)Food Safety, Veterinary and Plant Health (30 June 2010)(16)Taxation (30 June 2009)(18)Statistics (26 June 2007)(20)Business and Industry Policy (28 Şubat 2007)(21)Trans-European Networks (19 December 2007)(27)Environment (21 December 2009)(28)Consumer and Health Protection (19 December 2007)(32)Financial Control (26 June 2007)(22) Regional Policy and Coordination of Structural Instruments

Chapters for Which Turkey Has Presented It’s Negotiation Position Document to the Commission (2 Chapters)

(17)Economic and Monetary Policy (26) Education and Culture


EU Accession Negotiations Current StatusEU Accession Negotiations Current Status

6464

Screening Reports Approved at the Council of the European Union with Benchmarks (8 Chapters)

(1) Free Movement of Goods (3) Right of Establishment and Freedom to Provide Services (5) Public Procurement (8) Competition Policy (9) Financial Services (11) Agriculture and Rural Development (19)Social Policy and Employment (29) Customs Union

Draft Screening Reports are to be Approved at the Council of the European Union (9 Chapters)

(2) Freedom of Movement of Workers (13) Fisheries (14)Transport Policy (15) Energy (23) Judiciary and Fundamental Rights (24) Justice, Freedom and Security (30) External Relations (31) Foreign, Security and Defense Policy (33) Financial and Budgetary Provisions


Trade between Turkey and the EUTrade between Turkey and the EU

*January-OctoberSource: Data Source of the Ministry of Economy

6565DecemberDecember 2013 Ministry of Economy 2013 Ministry of Economy

1. EFTA (Norway, Switzerland, Iceland, Liechtenstein)

2. Israel

3. Macedonia

4. Bosnia and Herzegovina

5. Palestine

6. Tunisia

7. Morocco

8. Syria (**)

FTA CountriesFTA Countries

9. Egypt

•Albania

•Georgia

•Montenegro

•Serbia

•Chile

•Jordan

•South Korea

•Mauritius

•Lebanon*

•Kosovo*

(*) Agreements that are in the approval process

(**) Pending


1. Ukrain2. Colombia3. Ecuador4. Malaysia5. Moldova6. Democratic Republic of

the Congo7. Ghana

FTA Countries(On-going Negotiations)FTA Countries(On-going Negotiations)

8. Cameroon

9. Seychelles

10.Gulf Cooperation Council

11.Libya

12.MERCOSUR

13.Faroe Islands


Our exports to FTA Countries increased %7.2 in 2012. The share of FTA Countries in total exports reached

%9.6. Turkey recorded a trade surplus of 3.9 billion USD in

2012 with FTA Countries, while there was a trade deficit of 1.5 billion USD in 2002.

Trade with FTA CountriesTrade with FTA Countries


Trade Representatives AbroadTrade Representatives Abroad

183 trade representatives from the Ministry are serving in 105 countries, 162 locations and 8 offices abroad.


Daimi Temsilci Yardımcılığı

Ticaret Müşavirliği

Ticaret Ataşeliği

İrtibat Büroları

AFRİKA

KahireNairobi PretoriaRabatTrablusTunusKazablanka

ASYA

Astana Aşkabat Bangkok Bişkek Cakarta Duşanbe Hanoiİslamabad Kabil Kuala Lumpur Manila Pekin Seul Singapur

AVRUPA/KAFKASYAAVRUPA/KAFKASYAABDTÖOECDAtina Bakü Belgrad Berlin Bern BratislavaBrüksel Budapeşte Bükreş Dublin Helsinki Kiev Kişinev Kopenhag Lahey LizbonLefkoşa

Londra LubliyanaMadrid Minsk MoskovaOslo ParisPodgoricaPragPriştineRomaSaraybosna Sofya Stokholm TiflisTiran Üsküp Varşova Viyana Zagreb

BarselonaBatumDüsseldorfHamburgHannoverKazanMarsilyaMilanoMünihNovorossiskOdessaRotterdamSelanikSt. PetersburgStutgartBirminghamKrasnodarNovosibirskYekaterinburg

Taşkent Tokyo Ulan Bator Yeni Delhi AlmatıGuangzhouHong Kong KaraçiMumbaiŞangayGeorgetown

AbujaAddis Ababa AkraCezayirDakarDarüsselamHartumİskenderiye

Buenos Aires KarakasMexico CityOttavaSantiagoVaşingtonHoustonLos Angeles

AMERİKA

ORTA DOĞUORTA DOĞUAbu Dhabi Amman BağdatBeyrutDohaKuveytManama

MuskatRiyadSana ŞamTahranTel Aviv Basra

CiddeDubaiErbilHalepKudüsMusulTebriz

SidneyMelbourne

AVUSTRALYAAVUSTRALYA

New YorkSao PauloŞikagoTorontoMiamiSan FranciscoSeattle

GEORGETOWN

Locations of Trade RepresentativesLocations of Trade Representatives


• Export Oriented Production Strategy and Input Supply Strategy

• Market Access Strategy• Improving the Investment Climate• Trade Agreements• Next-Generation Free Zones• Trade in Services and Turkish Investments

Abroad • Market Surveillance and Inspection• Strengthening the Organization Abroad

Projects with Future ProspectsProjects with Future Prospects


Documents

MINISTRY of ECONOMY ECONOMIC OUTLOOK DECEMBER 2013 Economic Outlook is revized in the 1st and the 3rd weeks of the month. Recent Update: 19/12/2013