THE MINISTRY OF ECONOMY EXCHANGE RATES TRADE: TURKEY CASE

Transcription

1 THE MINISTRY OF ECONOMY EXCHANGE RATES TRADE: TURKEY CASE Seminar on Exchange Rates and Trade March, 2012

2 OUTLINE A- EXCHANGE RATE REGIMES IN TURKEY B- EVOLUTION OF TURKEY S FOREIGN TRADE C- FINAL REMARKS The Ministry of Economy 2

3 Period before 1980 Fixed Exchange Rate Regime Period between Crawling Peg Exchange Rate Regime ( ) Liberalization of the foreign exchange market in 1984 Currency substitution started in 1985 EXCHANGE RATE REGIMES IN TURKEY Liberalization of capital movements in 1989 with 32 numbered decree A flexible Exchange Rate Regime ( ) Adoption of Crawling Band Regime ( ) Economic Crisis in April 1994 Stabilization Program (April 5, 1994) The Ministry of Economy 3

4 Period between Rate of increase in foreign exchange basket was targeted in order to minimize the volatility of the real exchange rate for the years between Currency-Peg Regime was determined as the nominal anchor in the stabilization program in Stand-by Agreement with IMF in 2000 Liquidity Crisis in November 2000 New Agreement with IMF on December 18, 2000 No change on the exchange rate policy. EXCHANGE RATE REGIMES IN TURKEY The Ministry of Economy 4

5 EXCHANGE RATE REGIMES IN TURKEY Period Starting from 2001 Floating exchange rate regime Economic crisis in February New Stand-by Agreement with IMF on May 28, 2001 New Economic Stabilization Program initiated in 2002 Implicit Inflation Targeting between 2002 and 2005 Limited Central Bank intervention in the foreign exchange market - to prevent excessive volatility Formal Inflation Targeting adopted in 2006 Adoption of new regulations to ensure the efficiency in the foreign exchange market and to reinforce foreign exchange liquidity in the banking system in 2008 Expansionary monetary policy was abandoned with announcement of the Monetary Policy Exit Strategy on April 14, In the fourth quarter of 2010, inflation targeting was augmented with an additional financial stability orientation. The Ministry of Economy 5

6 DEVELOPMENTS IN TURKEY S ECONOMY GDP (Bl. $) GDP Growth (%) GDP Per Capita ($) 3,492 4,559 5,764 7,022 7,586 9,240 10,438 8,559 10,067 10,363 Unemployment (%) CPI (End of Year, %) Exports (FOB) (Bl. $) Imports (CIF) (Bl. $) Trade Balance(Bl. $) Current Account Balance (Bl. $) CAD/GDP (%) Net FDI (Bl. $) CBRT Reserves (Bl. $) Net External Debt Stock (Bl. $) CBRT Policy Interest Rate (%) Source: TurkStat (values in purple are estimations) 5.3% average annual growth between Significant increase in exports and imports, higher growth rates for imports Increasing trade deficit Continuous increase in the current account deficit (CAD) until the financial crises and remarkable jumps after 2009 The Ministry of Economy 6

7 EVOLUTION OF THE FOREIGN TRADE Turkey s Foreign Trade ( ) Source: TurkStat The Ministry of Economy 7

8 EVOLUTION OF THE CURRENT ACCOUNT AND TRADE BALANCE 20,000 Current Account and Trade Balance (12m rolling - million dollar) 0-20,000-40,000-60,000-80, , ,000 Source: Calculations from TurkStat Current Account Trade Balance The Ministry of Economy 8

9 Evolution of Turkey's Exports (Billion Dollar) HS Code Description 2000 HS Code Description Articles of apparel, accessories, kni Vehicles other than railway, tramw Articles of apparel, accessories, no Nuclear reactors, boilers, machiner Electrical, electronic equipment Iron and steel Iron and steel Electrical, electronic equipment Vehicles other than railway, tramw Articles of apparel, accessories, kni Nuclear reactors, boilers, machiner Mineral fuels, oils, distillation prod Edible fruit, nuts, peel of citrus frui Articles of iron or steel Other made textile articles, sets, w Articles of apparel, accessories, no Cotton Plastics and articles thereof Articles of iron or steel Edible fruit, nuts, peel of citrus frui 3.91 Subtotal Total Subtotal Total Evolution of Turkey's Imports (Billion Dollar) HS Code Description 2000 HS Code Description Mineral fuels, oils, distillation prod Mineral fuels, oils, distillation prod Nuclear reactors, boilers, machiner Nuclear reactors, boilers, machiner Electrical, electronic equipment Iron and steel Vehicles other than railway, tramw Vehicles other than railway, tramw Iron and steel Electrical, electronic equipment Plastics and articles thereof Plastics and articles thereof Organic chemicals Pearls, precious stones, metals, coi Optical, photo, technical, medical, Organic chemicals Cotton Pharmaceutical products Pharmaceutical products Copper and articles thereof 4.12 Source: TurkStat EVOLUTION OF THE FOREIGN TRADE SECTORAL Subtotal Total Subtotal Total The Ministry of Economy 9

10 EVOLUTION OF THE EXPORTS Exports vs. Real Effective Exchange Rate (Index, 2003q1-2011q4) Source: TurkStat, CBRT The Ministry of Economy 10

11 EVOLUTION OF THE EXPORTS - CURRENCIES Breakdown of Turkey s Exports: Currencies Source: TurkStat The Ministry of Economy 11

12 EVOLUTION OF THE EXPORTS vs. EXCHANGE RATES Exports vs. Euro/TL and USD/TL Source: TurkStat, CBRT The Ministry of Economy 12

13 EVOLUTION OF THE EXPORTS - REGIONAL Share of Exports to Near and Middle Eastern Countries vs. REER Top Ten Chapters in Turkey's Exports to Near and Middle Eastern Countries and North Africa HS CHAPTERS IRON AND STEEL MİNERAL FUELS, OİLS, DİSTİLLATİON PRODUCTS, ETC MACHİNERY, NUCLEAR REACTORS, BOİLERS, ETC ELECTRİCAL, ELECTRONİC EQUİPMENT ARTİCLES OF İRON OR STEEL VEHİCLES OTHER THAN RAİLWAY, TRAMWAY PLASTİCS AND ARTİCLES THEREOF PEARLS, PRECİOUS STONES, METALS, COİNS, ETC FURNİTURE, LİGHTİNG, SİGNS, PREFABRİCATED BUİLDİN ANİMAL,VEGETABLE FATS AND OİLS, CLEAVAGE PRODU Source: TurkStat (Billion Dollars) Source: Calculations from TurkStat The Ministry of Economy 13

14 220 EVOLUTION OF THE IMPORTS Imports vs. REER (Index, 2003q1-2011q4) Q1 Global Crises Source: TurkStat, CBRT Real Imports (Left Axis) REER The Ministry of Economy 14

15 EVOLUTION OF THE IMPORTS - CURRENCIES Decomposition of Turkey s Imports: Currencies Source: TurkStat The Ministry of Economy 15

16 EVOLUTION OF THE IMPORTS vs. EXCHANGE RATES Imports vs. Euro/TL and USD/TL Source: TurkStat, CBRT The Ministry of Economy 16

17 EVOLUTION OF THE IMPORTS SECTORS BY CURRENCIES Sectoral Breakdown of Imports in USD (% Share) MINERAL FUELS, LUBRICANTS AND RELATED MATERIALS 36.7% 34.8% 33.4% 35.8% MANUFACTURED GOODS CLASSIFIED CHIEFLY BY MATERIAL 18.4% 16.8% 17.8% 16.1% MACHINERY AND TRANSPORT EQUIPMENT 12.0% 15.8% 16.1% 13.7% CRUDE MATERIALS, INEDIBLE, EXCEPT FUELS 11.4% 10.6% 12.3% 12.1% CHEMICALS AND RELATED PRODUCTS, N.E.S. 8.9% 9.9% 9.6% 9.5% MISCELLANEOUS MANUFACTURED ARTICLES 4.1% 5.4% 5.1% 4.6% COMMODITIES AND TRANSACTIONS NOT CLASSIFIED ELSEWHERE 4.0% 2.3% 2.2% 4.1% FOOD AND LIVE ANIMALS 3.0% 2.9% 2.5% 2.9% ANIMAL AND VEGETABLE OILS, FATS AND WAXES 1.3% 1.3% 0.9% 1.1% BEVERAGES AND TOBACCO 0.2% 0.2% 0.2% 0.1% TOTAL 100.0% 100.0% 100.0% 100.0% Sectoral Breakdown of Imports in Euro (% Share) MACHINERY AND TRANSPORT EQUIPMENT 52.5% 51.9% 52.8% 53.0% MANUFACTURED GOODS CLASSIFIED CHIEFLY BY MATERIAL 18.3% 17.5% 17.6% 17.2% CHEMICALS AND RELATED PRODUCTS, N.E.S. 17.2% 18.1% 17.3% 16.5% MISCELLANEOUS MANUFACTURED ARTICLES 7.8% 7.7% 7.0% 6.8% FOOD AND LIVE ANIMALS 1.5% 1.9% 2.3% 2.8% CRUDE MATERIALS, INEDIBLE, EXCEPT FUELS 1.9% 1.7% 1.9% 2.2% COMMODITIES AND TRANSACTIONS NOT CLASSIFIED ELSEWHERE IN T 0.2% 0.2% 0.4% 0.6% BEVERAGES AND TOBACCO 0.4% 0.5% 0.4% 0.4% MINERAL FUELS, LUBRICANTS AND RELATED MATERIALS 0.2% 0.3% 0.3% 0.4% ANIMAL AND VEGETABLE OILS, FATS AND WAXES 0.1% 0.1% 0.1% 0.1% TOTAL 100.0% 100.0% 100.0% 100.0% Source: TurkStat, WTO The Ministry of Economy 17

18 EVOLUTION OF THE FOREIGN TRADE vs. EXCHANGE RATES Correlations - Quarterly (2004q1-2011q4, change wrt previous quarter) Real Exports Real Imports USD/TL % % EUR/TL % % EUR/USD 21.06% 46.22% REER 13.39% 31.08% Real Exports % 30.98% Real Imports 30.98% % Correlations - Annually (2004q1-2011q4, change wrt previous year) Real Exports Real Imports USD/TL % % EUR/TL % % EUR/USD 45.51% 35.52% REER 34.11% 52.17% GDP 70.09% 91.75% Real Exports % 65.34% Real Imports 65.34% % Source: Calculations from TurkStat, CBRT The Ministry of Economy 18

19 FINAL REMARKS Decreasing and/or delayed investments and FDIs between Mostly due to political instabilities Customs Union with the EU in 1996 Changing business environment after 2001 Macro reforms and political stability Significant increase in investments and FDIs Increase in productivity and profitability Efficiency-oriented restructuring in private sector Pressure over real wages Shift in the structure of manufacturing industry and exports From labor-intensive to capital-intensive Low value-added structure of capital-intensive production due to import dependency The Ministry of Economy 19

20 EFFECTS OF EXCHANGE RATES ON TURKEY S FOREIGN TRADE Effects of the developments in exchange rates: Imports: Remarkable increase in total bill Exports: Disadvantages of appreciating TL, especially in the EU market Threatening increase in trade deficit and current account deficit CAD/GDP around 10% in 2011 The Ministry of Economy 20

21 Recent actions to reduce trade deficit and CAD Export-Oriented Manufacturing Strategy GITES (Input Supply Strategy of Turkey) Reform in the Incentive System Recent actions to increase exports New approach to increase international competitiveness Communication on International Competitiveness Communication on Market Access Market Access Strategies by Countries and Sectors Increase in the number of Trade Counselors Increase in emphasis on trade in services FINAL REMARKS The Ministry of Economy 21

22 The MINISTRY of ECONOMY THANK YOU March, 2012