Exports to EU and EU’s Final Domestic Demand 15  160 EU's Final Domestic Demand (billion €  14  140  Exports to EU (2010=100, right axis)  13  120  12 100 11 80 10 60  9  2017*  2015  2016*  2014  2013  2012  2011  2010  2009  2008  2007  2006  2005  20 2004  7 2003  40  2002  8  * Forecast. Source: Eurostat, IHS CBRT. 4  Another factor that will lead to an improvement in exports and current account balance is the depreciation of the Turkish lira. As of January, the real effective exchange rate index has fallen to 88.2, which is the historically lowest level in the past 15 years (Figure 7). The most recent data show that export growth has been outpacing import growth and we expect this picture to become more evident during the first half of 2017. Figure 7. Real Effective Exchange Rate (CPI Based, 2003=100) 140  130  120  110  100  90  01.17  01.16  01.15  01.14  01.13  01.12  01.11  01.10  01.09  01.08  01.07  01.06  01.05  01.04  01.03  80  Source: CBRT. Regarding external finance, current account deficit is financed predominantly by FDI flows and long term borrowing (Figure 8).
Macroeconomic Outlook and Monetary Policy in Turkey Remarks by Murat Çetinkaya Governor Central Bank of the Republic of Turkey at J.P. Morgan Turkey Macro and Credit Conference London  9 February 2017  Dear Participants, My speech will try to elaborate on the recent macroeconomic outlook, monetary policy framework and the coordinated policy actions to support the fundamentals of the Turkish economy. 1. Macroeconomic Outlook Turkish economy was hit by concurrent shocks in recent years. Geopolitical tensions, global shocks, security related issues and a failed coup attempt have created significant policy challenges. Despite the intensity and size of the shocks in recent years, the growth rate has been quite robust until recently, outpacing emerging market average by a large margin (Figure 1). The resilience of growth in recent years can be attributed to factors such as prudent macroprudential policies reducing the sensitivity of economic activity to capital flow volatility, dynamic domestic market, market flexibility of exports, and the fall in energy prices. Figure 1. Growth Rates in Turkey and Emerging Economies (Percentage Change, Annual) 12 10 8 6 4 2 0 Developing Countries excluding China and India Turkey*  -2  12.16  09.16  06.16  03.16  12.15  09.15  06.15  03.15  12.14  09.14  06.14  03.14  12.13  09.13  06.13  03.13  12.12  09.12  06.12  03.12  -4  * Forecast for 2016 Q4.