economic outlook and construction sector in turkey
TRANSCRIPT
Republic of Turkey Prime Ministry
Investment Support and
Promotion Agency of Turkey (ISPAT)
Economic Outlook and
Construction Sector in Turkey
Necmettin KAYMAZ
Chief Project Director
ChemOrbis
Turkey 2nd Annual PVC Conference
February 12, 2015
İstanbul
AGENDA
Macroeconomic Outlook in Turkey
Turkish Construction Sector
Macroeconomic Outlook in Turkey
Source: UN, IMF, national sources
2013 Ranking of Countries with Population over 70 million
1.367
1.261
319
252
203
188
179
157
146
127
120
100
90
88
87
81
78
77
- 300 600 900 1.200 1.500
China (1)
India (2)
US (3)
Indonesia (4)
Brazil (5)
Pakistan (6)
Nigeria (7)
Bangladesh (8)
Russia (9)
Japan (10)
Mexico (11)
Philippines (12)
Vietnam (13)
Ethiopia (14)
Egypt (15)
Germany (16)
Iran (17)
Turkey (18)
Population
(Million)
16.768
9.469
4.899
3.636
2.246
2.097
1.877
1.261
870
822
522
367
272
271
233
171
162
46
- 5.000 10.000 15.000 20.000
US (1)
China (2)
Japan (3)
Germany (4)
Brazil (5)
Russia (6)
India (7)
Mexico (8)
Indonesia (9)
Turkey (10)
Nigeria (11)
Iran (12)
Philippines (13)
Egypt (14)
Pakistan (15)
Vietnam (16)
Bangladesh (17)
Ethiopia (18)
GDP
($ Billion)
52,6
45,0
38,5
14,4
11,1
10,8
10,5
6,9
4,7
3,5
3,1
2,9
2,7
1,9
1,5
1,2
1,0
0,5
0 10 20 30 40 50
US (1)
Germany (2)
Japan (3)
Russia (4)
Brazil (5)
Turkey (6)
Mexico (7)
China (8)
Iran (9)
Indonesia (10)
Egypt (11)
Nigeria (12)
Philippines (13)
Vietnam (14)
India (15)
Pakistan (16)
Bangladesh (17)
Ethiopia (18)
GDP per capita
($K)
Turkey stands out as a major economic power in the world with an economy of $822bn and a population of approximately 80 million…
Population Pyramid (%)
5 4 3 2 1 0 1 2 3 4 5
0-4
5-9
10-14
15-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65-69
70-74
75-79
80-84
85-89
90+
Female Male
%
Age Group TURKEY
5 4 3 2 1 0 1 2 3 4 5
0-4
5-9
10-14
15-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65-69
70-74
75-79
80-84
85-89
90+
Female Male
%
Age Group EUROPE
Source: Turkstat, Eurostat, UN, 2014
78 million young & dynamic people
5 4 3 2 1 0 1 2 3 4 5
0-4
5-9
10-14
15-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65-69
70-74
75-79
80-84
85-89
90+
Female Male
%
Age Group ASIA
Turkey has a young and dynamic population, with half under the age of 30, making Turkey the country with the largest youth population…
Source: IMF World Economic Outlook April 2014, Eurostat, OECD, TurkStat, OECD Economic Outlook No.95, May 2014
0,9 1,1 1,1
1,8
2,6 2,6
3,4 3,5 3,7
4,0 4,1 4,3
4,9
0
1
2
3
4
5
Average Annual Real GDP Growth (%) 2002-2013 Strong record, bright future
Turkish economy has been one of the fastest growing economies in the world over the past 11 years and is promising further growth in future…
1,1 1,1
1,4 1,5 1,5
1,6 1,7 1,7 1,9
2,0 2,0 2,1 2,2 2,2 2,2 2,2 2,3
2,4 2,6 2,6 2,6 2,6 2,7
2,9 2,9 2,9
4,2
0
1
2
3
4
Ge
rman
y
Jap
an
Po
rtu
gal
Spai
n
Ital
y
Den
mar
k
Euro
Are
a
Hu
nga
ry
Au
stri
a
Bel
giu
m
Fin
lan
d
Can
ada
Fran
ce
Po
lan
d
OEC
D
Gre
ece
Irel
and
US
Swed
en UK
Slo
vaki
a
Bra
zil
Ru
ssia
Cze
ch R
ep.
Mex
ico
Ko
rea
Turk
ey
Potential Real GDP Growth 2014-2030 (Average Annual, %)
Source: Indicators are based on the compilations of OECD and Turkstat data
90
95
100
105
110
115
120
125
130
135
140
Q1
-20
09
Q2
-20
09
Q3
-20
09
Q4
-20
09
Q1
-20
10
Q2
-20
10
Q3
-20
10
Q4
-20
10
Q1
-20
11
Q2
-20
11
Q3
-20
11
Q4
-20
11
Q1
-20
12
Q2
-20
12
Q3
-20
12
Q4
-20
12
Q1
-20
13
Q2
-20
13
Q3
-20
13
Q4
-20
13
Q1
-20
14
Q2
-20
14
Q3
-20
14
Turkey
Russia
Brazil
Poland
Czech Rep.
Hungary
Turkish economy has been distinguishing itself since the global financial crisis in 2009, outperforming peer economies…
Quarterly Real GDP (Index: Q1-2009=100, seasonally adjusted)
Source: TurkStat
Main Drivers of the Economic Growth
67,6%
29,7% 29,7%
10,1% 5,5%
-1,8%
-40,9%
-45%
-25%
-05%
15%
35%
55%
75%
Contribution to Real GDP Growth 2002-2013, Expenditure
Manufacturing; 27,1%
Financial intermediation;
18,3%
Transport, storage &
communication; 17,1%
Wholesale & retail trade;
14,3%
Other; 23,3%
Contribution to Real GDP Growth 2002-2013, Production
Turkish economy driven by entrepreneurial spirit of private sector, robust domestic market and lucrative export opportunities…
Construction: 6,6% Real Estate Activities: 2,9% Construction investment: 11,5%
Source: TURKSTAT, OECD
30,3
23,8
20,9
16,4
13,3
8,4 6,8
4,4 3,7 2,8 2,3 2,1 0
5
10
15
20
25
30
35
200
2
200
3
2004
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
Percentage (%) of Poor People Living on Less than $4,3 Per Day
63,6
47,4
40,5 40,2 39,8 39,2 34,3
30,8
25,1
7,3 0
10
20
30
40
50
60
1 2 3 4 5 6 7 8 9 10
Lowest income
top income group
Real Increase (%) in Household Income 2002-2012
I n c o m e D e c i l e G r o u p s ( 1 0 % )
-0,1
-0,08
-0,06
-0,04
-0,02
0
0,02
0,04
0,06
Turk
ey
Mex
ico
Irel
and
Gre
ece
Bel
giu
m
Spai
n
Hu
nga
ry
Ital
y
Slo
vaki
a
Po
rtu
gal
UK
Po
lan
d
Cze
ch R
ep.
Jap
an
No
rway
Ko
rea
Fran
ce
USA
Au
stri
a
Au
stra
lia
Ger
man
y
Fin
lan
d
Den
mar
k
Can
ada
Swed
en
Percentage point changes in the Gini coefficient (Mid-1990s to Mid-2000s)
Turkey’s robust economic growth has been translated into increasing income and decreasing poverty..
Rise of the middle-class in Turkey
Source: Euromonitor International; Credit Suisse, Adults are defined to be individuals aged 20 or above
0
2
4
6
8
10
12
14
16
18
2002 2013
10,6
2,3
5,3
18,0
1,0
9,5
Income < $10K Income > $10K Income > $25K
Number of Households by Annual Disposable Income (million)
5000
10000
15000
20000
25000
30000
2002 2013
11.141
25.909
Wealth per Adult ($)
Increasing income and decreasing poverty have paved the way for the emergence of a sizeable middle class…
Gross Public Debt Stock (% of GDP)
Strong macroeconomic fundamentals
Maastricht Criteria: 60 % Maastricht Criteria: -3 %,
74,0
36,3
60,3
87,1
35
40
45
50
55
60
65
70
75
80
85
90
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
TURKEY
EU
Source: Treasury, European Commission, Eurostat
-10,2
-1,6 -2,6
-3,3
-12
-9
-6
-3
0
20
02
20
03
20
04
20
05
20
06
20
07
20
08
200
9
20
10
20
11
20
12
20
13
TURKEY
EU
Central Government Budget Balance (% of GDP)
Turkey’s robust economic growth has been supported by strong macroeconomic fundamentals in public finance…
Source: TURKSTAT
Increasing and diversifying export
In addition to a robust domestic market, Turkey also offers lucrative export opportunities in the surrounding markets…
36
158
0
20
40
60
80
100
120
140
160
180
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
Export ($ Billion) 2002 2014
Number of export products with over $1 billion
9 37
Number of export markets with over $1 billion
8 34
Share of top 5 countries (%) 47 31
Share of MENA (%) 13 28,6
Share of North America (%) 10 4,6
Share of EU (%) 57 43
Customs Union with the European Union
Free Trade Agreements with 25 countries
Source: Ministry of Economy, * In ratification process *
1. Albania 14. Tunisia
2. Bosnia & Herzegovina 15. Montenegro
3. Egypt 16. Serbia
4. Georgia 17. Chile
5. Iceland 18. Jordan
6. Israel 19. Mauritius
7. Lichtenstein 20. South Korea
8. Macedonia 21. Lebanon*
9. Morocco 22. Kosovo*
10. Norway 23. Ghana*
11. Palestine 24. Malaysia*
12. Switzerland 25. Moldavia*
13. Syria
Free Trade
Lucrative export opportunities are support by free trade agreements and custom union with the EU…
Turkey’s geographic location is very convenient for accessing major export markets
Source: IMF World Economic Outlook and WTO; GDP, Imports and population figures as of 2013
EUROPE
GDP: $19.7 trillion Import: $6,6 trillion Population: 670 million
RUSSIA
GDP – $2.1 trillion Import: $344 billion Population: 143 million
MENA
GDP: $3,7 trillion Import: $1 trillion Population: 665 million
CENTRAL ASIA & CAUCASUS
GDP: $433 billion Import: $106 billion Population: 84 million
Access to Multiple Markets
1,5 Billion People
$26 Trillion GDP,
over $8 trillion trade
(45% global trade)
at a 4-hour flight
distance
A Manufacturing Hub
Source: Deloitte, oica, worldsteel, turkbesd TURKEY TURKEY TURKEY
T U R K E Y
Turkey will be the 16th manufacturing hub in the world and 2nd in Europe
Turkey is already;
17th largest automotive manufacturer in the world & the largest commercial vehicle manufacturer in Europe (2013)
8th largest steel manufacturer in the world & 2nd in Europe (2013)
Largest TV & white goods manufacturer in Europe (2013)
Turkey has emerged as a manufacturing hub in the region…
SOURCE: TSKB
PCs and peripherals • Tripling production with new investment • To export 90% of total
production
Heavy commercial vehicles • New model to be
manufactured in Turkey and exported to 65 countries
Energy • Tripling production to export to countries in
Europe, North Africa, and South America
FMCG
• Production base for the Middle Eastern and North African markets
Filters and generators • 85% of total
production to be exported
Textile • Moving all
production volume to Turkey
New line of trucks
•Regional manufacturing
hub for new line of trucks
• Annual production capacity of 150K units
• Exporting 90% of its production to 30 countries
Global companies have been using Turkey as a manufacturing and export hub..
Company Regions managed
from Turkey Rationale behind choosing Turkey as a management hub
90 countries • Eurasia • Africa
“Turkey is a strong country due to its dynamic economy and young population” -Ahmet Bozer, Executive Vice President and President of Coca Cola International, 2011
79 countries • Middle East • Africa
“Besides, the business opportunities Istanbul offers, its educated workforce and infrastructure supporting expats are important” -Ala Faramawy, VP Microsoft International, 2011
64 countries • Middle East • Africa
"Turkish managers have the European business ethics and discipline and the strong communication skills of Eastern managers" –Intel's Business Dev.Manager, Burak Aydın, 2012
52 countries • Europe • Central Asia • Middle East • North Africa
“Besides regional proximity to our clients, İstanbul provides appropriate infrastructure, convenient airport links, and a good quality of life for our staff.” Dimitris Tsitsiragos, VP, IFC, 2010
20 countries • Caucasus • Central Asia • Eastern Europe
"Pfizer Turkey is referred to as 'A School of Leaders', since it continuously transfers successful executives to Pfizer companies worldwide. Today, more than 35 Turkish senior executives are appointed to Pfizer affiliates all around the world. " –ISPAT website, 2012
Source: Press releases
Turkey is also becoming a regional management hub for global companies…
Turkey’s favorable economic environment has also made Turkey a magnet for foreign direct investment (FDI)…
Source: Central Bank of Republic of Turkey and Ministry of Economy
Increasing Foreign Direct Investment
15
149
0
30
60
90
120
150
1923-2002 (80 years) 2003-2014 (12 years)
FDI Inflows ($ billion)
5,6
41,1
0
5
10
15
20
25
30
35
40
45
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
# of Foreign Companies in Turkey ('000)
Source: OECD
-0,1
0
0,1
0,2
0,3
0,4
0,5
0,6
Ch
ina
Ind
on
esia
Ind
ia
New
Ze
alan
d
Mal
aysi
a
Mex
ico
Ru
ssia
Can
ada
Icel
and
Ko
rea
Au
stra
lia
Isra
el
Au
stri
a
Bra
zil
Un
ited
Sta
tes
No
rway
Swit
zerl
and
Po
lan
d
OEC
D -
Ave
rage U
K
Turk
ey
Swed
en
Jap
an
Ital
y
Slo
vaki
a
Fran
ce
Irel
and
Arg
enti
na
Den
mar
k
Gre
ece
Hu
nga
ry
Ger
man
y
Spai
n
Fin
lan
d
Net
her
lan
ds
Cze
ch R
ep.
Luxe
mb
ou
rg
Drop in Index Score from 2003 to 2013 2013 Score
TOP REFORMERS 1. Turkey 2. Malaysia 3. Finland 4. India 5. Russia
------ OECD
Average Score
in 2013
Index Score: 1=Closed to FDI, 0=Open to FDI
M o r e R e s t r i c t i v e L e s s R e s t r i c t i v e
FDI Regulatory Restrictiveness Index
Turkey has also emerged as the biggest reformer in the world in easing regulatory environment for foreign investors..
Source: A.T. Kearney
Likelihood of investment in a market over the next 3 years
0 0,5 1 1,5 2 2,5 3
USA (1)China (2)
Canada (3)UK(4)
Brazil (5)Germany (6)
India (7)Australia (8)
Singapore (9)France (10)
UAE (11)Mexico (12)
South Africa (13)Switzerland (14)
Malaysia (15)Sweden (16)
Chile (17)Spain (18)Japan (19)
Italy (20)Belgium (21)
Netherlands (22)Denmark (23)
Turkey (24)Indonesia (25)
Foreign Direct Investment Confidence Index 2014 (0=Low Confidence; 3=High Confidence)
Low Confidence High Confidence
Increasing Confidence in Turkey: FDI Confidence Index based on 300 companies’ responses
The Index examines overarching trends and ranks countries on how changes in their political, economic, and regulatory systems are likely to affect FDI inflows in the coming years.
Today, Turkey stands out as one of the most attractive destination for foreign direct investment in the world..
Construction Industry
Construction sector, together with real estate activities, is one of the main components of the Turkish economy
Key indicators in Turkish Construction Industry
Source: TURKSTAT; GDP figures in constant prices with production approach, 2013; employment as of Sep 2014, ENR 2014
5.9% of GDP
Construction Real Estate Activities
4.6% of GDP
+2 million
Employment
42 out of
250
2nd largest # of construction companies active in the world
Turkish construction market has been growing with 19% CAGR, while investment in the sector increasing with +10% CAGR
Source: Ministry of Science , Technology and Industry, TURKSTAT
59
78
91 96
108
137
165
201
0
50
100
150
200
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
Net Sales in Construction Sector (current prices, Billion TL)
19% CAGR
72
83
90
74
92
118
127
142
0
25
50
75
100
125
150
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
Public
Private
10,1% CAGR
Gross fixed investment in construction sector (current prices, Billion TL)
Construction turnover and production trends have been on steady growth since 2005 with a brief interruption in 2009…
Source: TURKSTAT
90
110
130
150
170
190
210
Q1
-20
05
Q2
-20
05
Q3
-20
05
Q4
-20
05
Q1
-20
06
Q2
-20
06
Q3
-20
06
Q4
-20
06
Q1
-20
07
Q2
-20
07
Q3
-20
07
Q4
-20
07
Q1
-20
08
Q2
-20
08
Q3
-20
08
Q4
-20
08
Q1
-20
09
Q2
-20
09
Q3
-20
09
Q4
-20
09
Q1
-20
10
Q2
-20
10
Q3
-20
10
Q4
-20
10
Q1
-20
11
Q2
-20
11
Q3
-20
11
Q4
-20
11
Q1
-20
12
Q2
-20
12
Q3
-20
12
Q4
-20
12
Q1
-20
13
Q2
-20
13
Q3
-20
13
Q4
-20
13
Q1
-20
14
Q2
-20
14
Q3
-20
14
Turnover
Production
Production & Turnover Indices in Construction (Seasonally-adjusted data, Index: 2005=100)
Every year approximately 100 thousand construction permits are granted for new buildings and expansions..
Source: TURKSTAT
4
3
5
0
7
5
1
14
11
4
10
7
95
92
14
0
10
2
10
8
12
1
0
20
40
60
80
100
120
140
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
Construction Permits by Number of Buildings (Thousand)
3
6
4
6
7
0
1
06
1
23
1
25
1
04
1
01
1
76
1
24
1
59
1
75
30
60
90
120
150
180
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
Construction Permits by floor area (million of m²)
Construction Permits by Number of Dwelling Units (Thousand)
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
162 203 330 547 600 585 504 518 907 650 771 836
Construction permits have been mainly for dwelling purpose…
Source: TURKSTAT, Breakdown is based on the number of buildings.
One-unit dwelling buildings; 23,5%
Multi-unit dwelling
buildings; 62,1%
Other purposes; 14,4%
Breakdown of Construction Permits by Purpose of Usage (2002-2013)
Other Purposes
Wholesale & retail trade buildings 4,0%
Industrial buildings & warehouses 3,2%
Other nonresidential buildings 2,4%
Office buildings 1,8%
Public entertainment, education, hospital or institutional care buildings
1,4%
Hotel and similar buildings 1,2%
Residences for communities 0,4%
Traffic and communication buildings 0,2%
TOTAL of Other Purposes 14,4%
Turkey has a robust housing market, over the past 2 years more than 2 million houses were sold…
Source: TURKSTAT
87
89
9
8
95
10
3
96
10
7
84
10
2
76
10
3
11
6
88
83
88
84
90
93
85
10
6
11
6
96
10
4
13
5
-
20
40
60
80
100
120
140
Number of House Sales in Turkey (Thousand)
25%, the largest share, of household expenditures is for housing and rent..
Turkish construction and real estate sectors have attracted more than $35 billion foreign direct investment (FDI) . .
Source: CBRT and MoE
Real Estate Activities
$2,5bn
Real Estate Purchases $29,3 bn
Total FDI Inflows to Selected Sectors 2003-2014 ($ Billion)
Number of Foreign Companies
Sector #
Construction 3.698
Real Estate Activities 2.429
TOTAL 6.127
Housing sector in Turkey is expected to grow further with both public and private investment..
Source: Ministry of Development, 10th Development Plan 2014-2018, Vision 2023
Government has committed 4.6 Billion TL gross fixed investment in housing for 2014-2018
Housing need is estimated to be 4.1 million units for 2014-2018
As a result of urban transformation, 6.5 million buildings are expected to be renewed (100K have already been identified for renewal)
Number of houses built by the Housing Development Administration (TOKİ) to reach 1 million by 2023 (641K have already been built)
Thank You