Turkey: Recent Developments and Future Prospects. ISBANK Economic Research Division November 2018

Transcription

1 Turkey: Recent Developments and Future Prospects ISBANK Economic Research Division November 2018

2 Macroeconomic Outlook

3 Strong Economic Growth Cycle GDP of 851 bn USD (2017), 10.6k USD (2017) per capita Average GDP growth rate of 5.5% between th largest economy in the world & 6 th largest economy amongst the EU countries More than 9 mn job creation since 2005 Prudent fiscal policy since

4 ,304 7, ,656 8, ,931 10, , ,588 11,019 10,883 10,597 12,480 12, Gross Domestic Product Turkey s GDP came in at 851 billion USD in GDP (billion USD) Per capita GDP (USD) Source: Datastream, Turkstat

5 Economic Growth Growth was largely driven by private consumption and investments in Q2. Real GDP Growth* (%) Contributions to Growth** (2009=100 chain linked volume index % points) (*) Latest figure as of 2018 H1 (**) Latest figure as of 2018 Q Stock Change Net Exports Investment Consumption -6 GDP Source: Datastream, Turkstat

6 Leading Indicators The slowdown in economic activity 25 Calendar Adjusted Industrial Production (yoy, % change) 120 Confidence Indices Real sector confidence index Economic confidence index Consumer confidence index Q Q Q Q Q Q Q Q Oct-14 Oct-15 Oct-16 Oct-17 Oct-18 6 Source: Turkstat, Datastream

7 Labor Market More than 9 million new jobs were created since Labor Market Indicators* (%) Unemployment Labor Participation Rate Employment* (millions) (*) Seasonally adjusted figures. Latest figure as of August Source: Turkstat, Datastream

8 Fiscal Discipline Fiscal discipline has been the main pillar of economic policy. Budget Deficit (% GDP) General Government Debt Stock (% GDP) Maastricht criterion: 3% Maastricht criterion: 60% F* (*) New Economic Program forecasts F* Source: Turkstat, Ministry of Treasury and Finance

9 Exports Export volume reached all-time highs. Exports* (billion USD) Exports* (% of total) (*) 12-month cumulative figures as of September Motor vehicles Boilers and machineries Iron and steel Knitted and crocheted goods Electrical machinery and equipment Precious stones Articles of iron and steel Non knitted and crocheted goods Plastic and articles Edible fruits and nuts Source: Turkstat, Datastream

10 Exports Turkey has been successful in diversifying export markets Top 10 Export Markets % of total 2018* % of total Exports* (% of total) 1. Germany Germany UK UK Italy Italy 5.7 EU US USA France Iraq Spain Spain 4.5 Near and Middle East 7. Iraq France Netherlands Netherlands Russia Romania 2.4 The share of first Israel Romania 2.3 The share of first (*) 12-month cumulative figures as of September Source: Datastream, Turkstat

11 Imports Import volume became 239 billion USD. Imports* (billion USD) Imports* (% of total) Minerals and Fuels 17.3 Boilers and machineries 11.5 Electrical machinery and equipment 8.3 Iron and steel 8.2 Motor Vehicles 7.2 Precious Stones 6.3 Plastic and articles Organic chemicals Optical products Pharmaceutical products (*) 12-month cumulative figures as of September 2018 Source: Datastream,Turkstat 11

12 Imports 28% of imports are from China, Russia and Germany Top 10 Import Markets % of total 2018* % of total Composition of Imports (%) 1. Germany 2. Russia 3. Italy China 2. Russia 3. Germany * China USA France Italy USA France UK UK Switzerland 9. Spain India 9. Iran Capital Goods 10.South Korea South Korea 3.0 Intermediate Goods The share of first The share of first Consumption Goods (*) 12-month cumulative figures as of September Source: Turkstat

13 Tourism Tourism sector has recovered considerably. Tourism Revenues* (USD bn) Russia The Number of Tourists (million persons) Germany Iran Georgia Bulgaria * 2017 UK Ukraine Iraq Netherlands Azerbaijan Number of Tourists 2015: 36.2 mn 2016: 25.4 mn 2017: 32.4 mn 2018*: 38.2 mn (*) 12-month cumulative figures as of September Source: CBRT, Ministry of Culture and Tourism

14 Savings & Investments Saving-investment gap of Turkey Investments and Savings (% of GDP) Saving Gap New Economic Program Forecasts Savings Investments Source: Turkstat, New Economic Program ( )

15 Current Account Balance Current account deficit started to decline. Current Account Deficit (% of GDP) 100 Financing of CAD (12-month cumulative, billion USD) September Foreign Direct and Long Term Investments* Portfolio and Short Term Investments** -60 Current Account Deficit (*) Long term capital movements are sum of banking and real sectors long term net credit and bonds issued by banks and the Treasury (**) Short-term capital movements are sum of banking and real sectors' short term net credits and deposits in banks. Source: Turkstat, CBRT 15

16 Capital Flows Volatile capital inflows Portfolio Inflows (12-month cumulative, billion USD) Debt Securities Equity Securities Foreign Direct Investment Inflows (12- month cumulative, billion USD) -15 Jan.16 Jul.16 Jan.17 Jul.17 Jan.18 Jul.18 0 Jan.16 Jul.16 Jan.17 Jul.17 Jan.18 Jul Source: CBRT

17 Monetary Policy Central Bank has implemented tight liquidity policy. Annual CPI Inflation* (%) Interest Rates (%) Interest Rate Corridor One Week Repo Rate CBRT Weighted Average Cost of Funding Late Liquidity Window (*) Latest figure as of October Jan.18 Mar.18 May.18 Jul.18 Sep.18 Nov.18 Source: CBRT, Turkstat, Datastream 17

18 Nominal depreciation in local currency Financial Markets Emerging market currencies have fluctuated so far this year. USD vs Local Currencies (Dec. 31, 2016 = 100) Equity Indices (Dec. 31, 2016 = 100) 200 Turkey Brazil 160 Turkey Brazil 180 Russia Russia 160 Indonesia South Africa 140 Indonesia South Africa Jan.17 Aug.17 Mar.18 Oct Jan.17 Aug.17 Mar.18 Oct.18 Latest figure as of November 16, Source: Datastream

19 Financial Markets Risk premiums of emerging markets Y Government Bond Yields (%) Turkey Brazil Russia Indonesia South Africa Turkey Brazil Russia Indonesia South Africa 5Y CDS Spreads (bps) Jan.17 Aug.17 Mar.18 Oct Jan.17 Aug.17 Mar.18 Oct.18 Latest figure as of November 21, Source: Datastream

20 Banking Sector Dynamics

21 Banking Sector Dynamics Increased intermediation activity by financing the growth of Turkish economy Diversification of funding sources by increasing access to international markets Shifting focus from growth to asset quality and stable funding structure Strengthened asset quality confirmed by low NPL ratios High capital adequacy ratio Strong growth potential 21

22 Basic Indicators Increase in foreign bank presence Public Foreign Domestic Private Number of Banks* Share in Total Assets (%) Public Foreign Domestic Private September September 2018 (*) Excluding the banks under the administration of the SDIF 22 Source: BRSA

23 6,521 7,256 8, , ,462 9,250 9,526 10, ,212 10,440 10, , ,614 11,903 12,125 12,185 11,664 11,508 11, , , , , , , , , ,870 Basic Indicators Branch network and banking sector employment Number of Domestic Branches Number of Domestic Staff Latest figure as of September Source: BRSA

24 Basic Indicators Strong growth performance in the banking sector 57 Nominal GDP Growth (%) Loan Growth (%) Assets (bn USD) Loans (bn USD) Deposits (bn USD) Equity (bn USD) X X X X September September September September Source: BRSA, Turkstat

25 Balance Sheet Items Increasing financial intermediation role of banks Asset Composition (%) Liability Composition (%) Other Assets Other Liabilities Cash+Banks Securities Shareholder's Equity Securities Issued 40 Loans 16 Banks Deposits September September Source: BRSA

26 Deposits Deposits have been the main funding source of the banking sector. Deposit Volume (annual % change) Share of TL Deposits in Total (%) TL Deposits FX Deposits in USD Terms -15 Total Deposits (exchange rate adjusted) Latest figure as of November 9, Source: BRSA

27 Loans Loan growth has lost momentum since the last quarter of Loan Volume (annual % change) Share of TL Loans in Total (%) TL Loans 0 FX Loans in USD Terms Total Loans (exchange rate adjusted) Latest figure as of November 9, Source: BRSA

28 Non-Performing Loans NPL ratio has remained at low level. Non-performing Loan Ratio* (%) Greece S. Cyprus Portugal Italy Slovenia Ireland Bulgaria Hungary Romania Poland Spain Austria EU Average Malta France Turkey Belgium Latvia Denmark Germany Netherlands UK Norway Finland Luxembourg Sweden NPL Ratio (%, 2016) (*) Latest figure as of September Source: BRSA, EBA

29 Loans by Sectors Manufacturing industry has the highest share in total loans. Loans by Sectors (% share, September 2018) Manufacturing industry 18.4 Wholesale trade 12.5 Construction 8.5 Electricity, Gas and Water Resources 7.2 Transportation, Storage and Communication 5.2 Agriculture Retail trade Research, Consulting, Advertising etc. Textile and textile products Main Metal Industry Tourism Source: BRSA

30 Non-Performing Loans by Sectors Non-performing loans ratio by sectors NPL Ratio (%, September 2018) Tourism 4.2 Retail trade Wholesale trade Agriculture Construction Electricity, Gas and Water Resources Manufacturing industry Textile and textile products Main Metal Industry Transportation, Storage and Communication Research, Consulting, Advertising etc Source: BRSA

31 Net FX Position of NFCs Short-term FX risks have been managed carefully by the non-financial sector Net FX Position of the Non-Financial Sector (bn USD) August Long Term Net FX Position Short Term Net FX Position Net FX Position 31 Source: CBRT

32 FX Assets & Liabilities of NFCs Majority of FX loans of non-financial companies were raised from domestic banks FX Liabilities of NFCs (bn USD) Import Payables External Loans Domestic Loans August 2018 FX Assets of NFCs (bn USD) Direct Investment Abroad Export Receivables Deposits August Source: CBRT

33 Public - Private Partnership Projects A total of 197 PPI projects, worth of billion USD, have been completed / under construction since Annual Infrastructure Investment Amounts and Sectoral Distribution of Projects Contracted since 2006 (bn USD) Sectoral Distribution of Total Infrastructure Investment Amount ( , bn USD) 33 Source: CBRT

34 Short Term External Debt Stock Turkey s external financing needs in the coming 12 months September 2018 (*) (bn USD) Share (%) Central Bank General Government Banks Credits FX Deposits Bank Accounts Branches and Affiliates Abroad TRY Deposits Branches and Affiliates Abroad Other Sectors Trade Credits Other Credits Public Private Total Month Long-Term Debt Roll Over Ratio (%) Banking Sector Non-banking Sector September 2018 (*) External debt maturing within 1 year or less regardless of the original maturity. 34 Source: CBRT

35 Breakdown of FX Loans In line with strict regulations, FX liabilities belong mostly to large-scale corporates that generate or have potential to generate FX revenues. Firm Size Breakdown of Domestic FX Corporate Loans (% share) Breakdown of Corporate FX Loans by Amounts (% share, # of companies) Large (Rha) Medium Small Micro Not: Loans extended abroad and used via the intermediacy of domestic banks are included. Source: CBRT 35

36 Non-Deposit Sources Banks have diversified their funding sources. 60 Net FX Position* (billion USD) External Borrowings of the Banks** (outstanding amount, billion USD) Eurobonds Syndication Loans Securitization Loans 40 Double Investment Grade (May Sep.2016) Net On Balance Off Balance (*) Latest figure as of November 9, 2018 (**) Latest figure as of September Source: BRSA

37 Capital Adequacy Ratio Turkish banks continued to be very well capitalized Target Rate of 12% Legal Limit of 8% Capital Adequacy Ratio* (%) (*) Latest figure as of September Netherlands Ireland Latvia Croatia Bulgaria Slovenia Slovakia Germany EU Average Belgium Czech Rep. Malta France Austria Greece Hungary Poland S. Cyprus Turkey Spain Italy Portugal Capital Adequacy Ratio (%, 2016) Source: BRSA, EBA

38 Alternative Banking Channels A promising innovative future for mobile banking in Turkey Internet Banking (number of active customers, thousand persons) Mobile Banking (number of active customers, thousand persons) X1.7 12,548 34,226 7,227 X Q Q Q Q2 38 Source: The Banks Association of Turkey

39 Profitability Net interest margin is 4%. NIM* Cost / Income Ratio 5.4% 4.3% 3.5% 4.1% 3.7% 3.5% 3.5% 3.6% 3.8% 4.0%** 36% 41% 44% 41% 43% 45% 46% 40% 38% 33%*** (*) Net interest income / average total assets (**) 12-month cumulative as of September 2018 (***) As of September Source: BRSA

40 Profitability Profitable banking sector... ROAA ROAE 2.6% 2.5% 23% 20% 1.7% 1.8% 1.6% 1.3% 1.2% 1.5% 1.6% 1.6% 15% 16% 14% 12% 11% 14% 16% 16% Q Q3 40 Source: BRSA

41 Stock Exchange Performance Turkish equity market came under pressure in Stock Exchange Performance (thousands) BIST-100 Index Banking Sector Index (right axis) Latest figure as of November 16, Source: Datastream

42 Banking Sector Comparison Despite the fast growth in the sector, penetration ratios are still low. Banking Sector s Assets in Turkey (% GDP) Banking Sector s Comparison with Euro Area (2017) (%, 2015) Assets/GDP Loans/GDP Housing Loans/GDP 6 38 EA-19 Deposits/GDP Turkey Source: BRSA, Turkstat, ECB, Eurostat

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