As a result of the 2000 November and 2001 Februrary crises, the GDP of Turkey contracted approximately 7.5 percent. In 2002 the GDP started to increase again in growth to 7.8 per cent. In first quarter of 2003 GDP growth was 8.1 percent. In first half of 2003 the GDP growth was 5.8 when campared with the same period term of last year. At the same period GNP growth was 5.8 percent.
According to a World Bank survey Turkey is the nineteenth bigbest economy in the world in terms of purchasing power parity. In terms of Purchasing Power Parity, Turkey’s GNP is 426 billion dollars and national income per capita is 6,120 dollars.
The government has an agreement with the IMF designed to curb the impact of the crisis that engulfed Turkey’s banking and financial markets. The IMF made US$18 billion available to Turkey, including a US$701 million loan made available under the stand-by arrangement in April 2003.
The objectives of the IMF-backed programme put forward by the government is to reinforce efforts to reduce inflation to single digits, ensure a sustainable fiscal position, remedy chronic structural inefficiencies in the economy, and raise the sustainable level of growth. By 2003 IIQ, GDP growth had risen to 5.8 per cent, inflation (September 2003) had fallen to 19.1 per cent and the lira had stabilised, reaching TL1,450,000.00 per US$ by October 2003. The government still has a long way to go to stabilize the economy and the IMF has encouraged the authorities to continue to tighten the fiscal policy during 2003, which is anticipated primarily to improve the external current account balance and support disinflation.
External trade
Turkey entered a customs union with the EU in 1995. This led to the abolition of customs duties on industrial products imported from the EU and the European Free Trade Association (EFTA) in 1996. Under the terms of the agreement, Turkey has reduced its high tariffs, leading to greater capital flows, but has also seen intense competition from EU states for a share of the lucrative Turkish consumer market.
Turkey has also intensified efforts to cooperate with its neighbours on the Black Sea. The Black Sea Trade and Development Bank, the financial arm of the Black Sea Economic Co-operation Organisation (BSECO), aims to promote trade and investment among the 330 million people living within BSECO’s 11 member states (Albania, Armenia, Azerbaijan, Bulgaria, Georgia, Greece, Moldova, Romania, Russia, Turkey and Ukraine).
Exports
The trends in export shifted significantly in 2003. Besides textiles, the automobile sector strengthened its position. With rapidly growing automobile exportation, the monthly export figure exceeded 4 billion dollar for the first time in 2003. September 2003 figures will be higher 5 billion dollar according to predictions. Import figures for the same figure vary between 5 - 6 billion dollars. In the first seven months Turkey’s exports stood at 25.5 billion dollars, imports stood at 36.6 billion dollars.
The foreign trade volume (import + export) at year-end is expected to be above 100 billion dollars.
Main destinations
Germany (16,3 per cent of 2003 July total), US (8.5 per cent), Italy (7.0 per cent), UK (7.5 per cent), France (5,9 per cent), Spain (3,8 per cent).
Imports
Principal imports include machinery (including electrical machinery), fuels, coals, chemical industrial products, iron and steel products, motor vehicles and processed petroleum products.
Main sources
Germany (13.0 per cent of 2003 January-July), Italy (8,1 per cent), Russia (7.3 per cent), France (5.8 per cent), UK (5.5 Per cent) US (5,2 per cent),
Agriculture
Farming
The share of agriculture in GDP dropped to 6.8 percent in first half of 2003. In the first seven months of the year, the share of agriculture in exports was 4.4 percent. But the growth of agricultre was 0.6 percent in first half of the year suggesting that it under performed compared to other sectors in the economy.
Turkey remains self sufficient in food with agricultural exports including tobacco, cotton, dried fruit (hazelnuts, seedless raisins, figs, apricots), pulses (chickpeas and lentils), live sheep, goats, fresh fruits (apples and citrus fruits) and fresh tomatoes. Cereals, especially wheat and barley, are Turkey’s most important crops.
Imports, particularly of dairy products and beef, are growing faster than exports. Significant quantities of rice and processed food products are also imported. Liberal trade policies have opened up Turkey’s markets for imports of both cotton and burley tobacco.
Government policy includes the project running with the World Bank under the title ’Direct Income Support’ to the farmers. In the first eight months of 2003 farmers got TL1.9 quadrillion TL with this assistance (nearly 2 percent of budget).
Fishing
Salt water fishing contributes 77 percent of the total fishery production, with 62 per cent of the catches obtained from the Black Sea. Anchovies remain the traditional catch with potential for further processing. Fishery production also thrives on horse mackerel, whiting and bonito.
The main production area for inland fisheries is the Lake Van, where gray mullets are mainly caught. The Southeast Anatolian Project (GAP) comprising the construction of Atatürk Dam and other small ones has a total 123,000 hectares of inland fresh water capacity. It is expected to increase the potential for inland fisheries by over nine thousand tonnes.
Trout constitute more than 60 percent of the total aquacultural production, 25 percent of which is obtained from the Aegean region. Turkey mainly exports large quantities of canned tuna to the EU and other developed countries.
Forestry
Forest and other wooded land accounts for slightly more than a quarter of the total land area, with forest cover estimated at 10.2 million hectares (ha). Afforestation has led to an annual average increase of 0.22 per cent, the equivalent of 22,000ha of forest cover in 1990--2000. Most of the forest is available for wood supply, although it is moderately used for fuel consumption. Only a small area of forest is owned by the State.
Turkey produces a significant quantity of industrial roundwood. Major forest industries rely on local resources for the production of sawn wood, particleboard and plywood. The pulp and paper industry is able to meet domestic demand by imports. In 2000, total imports of forest products amounted to US$1.2 billion, compared to exports which totalled US$81.5 million.
Tourism
Turkey has an extraordinary geographical location being surrounded by three seas which makes it highly attractive for sun and sea tourism. The historical background of Central Anatolia is also a pole of attraction for tourists.
The end of major hostilities in Iraq has dispersed the negative atmosphere which had created a downturn in tourism in early 2003. Tourism facilities have operated at full capacity during the summer months. 2003. 11 million 618 thousand tourists had visited Turkey in 2001. In first nine months of 2003 the figure stood at 10 million 902 thousand. The figure of foreign visitors to Turkey only in September is higher than 1 millon 900 thousand.
Hydrocarbons
Oil
The country relies on importing and refining oil, notably from Russia as well as Middle Eastern countries such as Libya and Algeria. Demand is growing by 2 - 3 per cent per year - slower than overall energy demand, as Turkey moves towards using gas to satisfy its energy needs.
Domestic production is dominated by state - owned Turkish State Petroleum Company (TPAO), which typically produces 80 per cent of the country’s oil output. Royal Dutch/Shell and ExxonMobil also produce in Turkey. Some 20 companies prospecting in Turkey report promising discoveries.
TPAO is a member of the Azerbaijan International Oil Consortium and has prospecting operations in the Middle East, North Africa, and Kazakhstan, where it has a joint exploration venture with the Kazakh ministries of geology and energy. It is a partner in Azerbaijan’s Shah Deniz gas field, holding a 9 per cent interest in the offshore site.
State-owned Tupras refines up to 85 per cent of Turkey’s petroleum products. In 2002, agreements were reached between Azerbaijan, Georgia and Turkey for a US $2.4 billion pipeline running to the Turkish Mediterranean port of Ceyhan. The 1,760 km pipeline will carry oil from Azerbaijan’s port of Baku through Georgia and then across Turkey to Ceyhan.
Gas
Turkey has to import natural gas for domestic use; it can supply only 2 percent of its domestic requirements. Turkey’s domestic gas consumption increased from 4.5 billion cubic metres in 1992 to 17.4 billion cubic metres in 2002. Analysts have quoted figures of between 45 and 82 billion cubic metres for annual consumption in 2010-15.
Arco, Shell and TPAO number among the major domestic gas producers. A multitude of conflicting plans are in the process of formation, to import gas from Iran, Turkmenistan, Azerbaijan and direct from Russia. In October 2002, the construction of the 1,393 km Blue Stream twin gas pipeline running under the Black Sea from Russia to Turkey was completed. In March 2002, Greece and Turkey signed a US$300 million agreement to build a pipeline to carry Iranian and Central Asian natural gas through Turkey to a Greek port and from there to Western Europe.
Coal
In 2002, Turkey had coal reserves of 3.7 billion tonnes, including 278 million tonnes of anthracite and bituminous coal (hard coal) and 3.4 billion tonnes of sub-bituminious and lignite coal. Despite the huge reserves, production levels have fallen as a result of a lack of investment in the coal industry. Output totalled 11.5 million tonnes oil equivalent in 2002.
Energy
Turkey’s geographic location makes it a potential energy bridge between the West and the oil and gas deposits of Central Asia. The country is keen to develop a role as a regional energy distribution hub, enabling it to develop closer political relations with its neighbours and achieve energy security. Turkey is a net energy importer (about 60 percent of its energy requirements) and is Europe’s fastest-growing energy market. Demand is not being met in a country that still experiences frequent blackouts and industrial losses as a result of the energy bottleneck. Total installed generating capacity was 26,226MW in 2002. Turkey has plans for an additional 23,603 MW in power generating capacity by 2020.
There has been rapid expansion of hydroelectricity capacity with over 104 power plants operational in Turkey. Several gas - fired power plants, including a 763 MW plant at Baymina, are due to become operational before
the end of 2003. Approximately 21 dams and 19 hydro power plants are being constructed as part of the GAP project. There are plans to develop nuclear energy (possibly after 2010) as a source of electricity.
Financial markets
Stock exchange
History of the Securities Market in Turkey
The origin of an organized securities market in Turkey has its roots in the second half of the 19th century. The first securities market in the Ottoman Empire was established in 1866 under the name of "Dersaadet Securities Exchange" following the Crimean War. Dersaadet Exchange also created a medium for European investors who were seeking higher returns in the vast Ottoman markets. Following the proclamation of the Turkish Republic on the ruins of the Ottoman Empire, a new law was enacted in 1929 to reorganize the fledgling capital markets under the new name of "Istanbul Securities and Foreign Exchange Bourse."
The early phase of the 1980’s saw a marked improvement in the Turkish capital markets, both in regard to the legislative framework and the institutions required to set the stage for sound capital movements. In 1981, the "Capital Market Law" was enacted. One year later, the main regulatory body responsible for the supervision and regulation of the Turkish securities market, the Capital Markets Board based in Ankara, was established.
After the financial crises in 2001 ISE became more stable. By the end of the Iraq War ISE has started to increase and from the begining of the year it has been rated as one of the best performing stock exchange in the world.
Commodity exchange
As a prominent gold importer, Turkey owes its physical gold demand (reaching to 200 tonnes (6.430.148 ounces) per year) to the popularity of gold in the eyes’ of the Turkish people.
The restructuring model for gold was aimed at converting the existing idle gold savings into an active resource for the Turkish economy and canalising them into investments. Developing a gold - based financial system, establishing Istanbul Gold Exchange, developing gold - banking, supporting jewellery sector and finally establishing Gold Refinery are the main steps of this model.
On July 26, 1995 the Istanbul Gold Exchange was opened with the objectives of liberalizing the Turkish gold sector and integrating it with the international markets, rationalizing the gold imports and introducing gold-based financial instruments.
Banking and insurance
The banking sector was hit most severely by the November 2000 and Februrary 2001 crises. Banks contracted their balance sheets to overcome the crises. 2003 was the recovery year of the sector.
· By June 2003 Turkey’s banking sector total assets were approximately US $150.4 billion.
· Total assets as such are nearly the same as of the end of year 2002.
· The ratio of total assets in GNP decreased. In 2002, the ratio of total assets in GNP was 78 per cent and dropped to 68 per cent in first half of 2003.
By June 2003 the term profit of the sector is 2.423 trillion TL.
The banking sector was partly responsible for Turkey’s financial crisis in 2001, and led the government to reduce the number of state banks from four to three after Emlak Bank was merged into TC Ziraat Bankasi. In October 2001, three private sector banks belonging to the Dogus Group were merged into Garanti (Ottoman Bank and Körfezbank) while the UK’s HSBC purchased Demirbank in November 2001. In June 2002, Pamukbank, the smaller of two banks in Cukurova grup, announced its merger with Turkey’s third largest bank, Yapi Kredi.
Rehabilitating the banking sector cost the state (which guaranteed all deposits and previously failed to compensate state banks for issuing subsidised loans at its request) the equivalent of 30 per cent of GDP in 2001/02. The cost of banking reforms was one of the central aims of a US $15.7 billion loan made to Turkey in 2001 by the IMF and the World Bank.
Central Bank
Türkiye Cumhuriyet Merkez Bankasi (TCMB) (Central Bank of the Republic of Turkey) www.tcmb.gov.tr and www.cbtr.gov.tr
Industry
Industry was the locomotive of the recovery in 2002 and 2003. The industrial production index increased 5.5 percent in 2000 and decreased 8.9 per cent in 2001. And in 2002 it increased 9.2 per cent again. The trend of rapid growth continued in 2003 and production increased by 8.2 percent in the first eight months. The manufacturing industry grew by 12.8 percent during the same period.
Monthly capacity utilization ratio is 92.1 in the public sector and 71 percent in the private sector (August 2003)
Inflation
Turkey succied in lowering inflation which has been the bane of the economy in the past. With the assistance of policies for disinflation, inflation dropped to 68.5 per cent at the end of 2002. And consumer prices index which was 29.7 per cent in 2002 dropped to 23 percent in September 2003. The wholesale products index which was 88.6 percent in 2001 has dropped to 30.8 per cent in 2002 and 19.1 percent in September 2003. The target of the government is pulling down the consumer product index to 20 per cent by the end of 2003 and 12 per cent by the end of 2004.
Foreign Investment
Turkey ranks 49th in attracting foreign investment in the world according to the World Invesment Report of UNCTAD.
Between 1991 - 1996 Turkey attracted an average investment of 0.7 billion dollar per year. In 2002 this figure went up to 0.9 billion dollars and in 2001 it went up to 3.2 billion dollars. After the economic crises it dropped to 1 billion dollars in 2002.
Also the parliament enacted the key legislation to attract foreign investment to Turkey.
Privatization
Turkey started privatization efforts in 1986 and the privatization target for 2003 is 4 billion dollar. According to the privatization program the government plans to sell big companies like Tüpraş (Rafinery), TEKEL (Tobacco monopoly) and PETKİM, which is the bigest petro chemical concern in Turkey, until end of 2003. The national lottery company Milli Piyango is moving towards privatization. World giants JTI (Japan Tobacco Int), British and American Tobacco (BAT) and Philip Morris have indicated interest in the Turkish tobacco monopoly TEKEL.
