Global Economic Trends

Special Focus on Developing Countries

ChemOrbis Asia 6th Petrochemical Conference 10 June 2015, Kula Lumpur, Malaysia

Necmettin KAYMAZ Chief Project Director

Republic of Turkey Prime Ministry

Investment Support & Promotion Agency of Turkey (ISPAT)

AGENDA

Overview of Global Economy

Recent Developments’ Impact on Global Economy

Impact on Emerging & Developing Asian Economies

Investment Support & Promotion Agency of Turkey

International Network

Established in 2006 to increase & attract direct investment

Attached to the Prime Ministry & directly report to the PM

Private sector approach with public sector capabilities

ONE STOP SHOP approach

Providing extensive services:

Coordination with government agencies

Industry analysis and reports

Site selection

Facilitating legal procedures, such as:

- Company set-up;

- Incentive applications

- Work permits

Overview of Global Economy

Source: IMF

Global economy has been on constant growth since 1980 despite volatile growth rates and is expected to reach almost $150 trillion by 2020, up from $108 trillion in 2014..

Global economy expanded 3,4% in

2014 and is expected to grow

3,5% in 2015

forecast

0%

1%

2%

3%

4%

5%

6%

1980 1985 1990 1995 2000 2005 2010 2015 2020

World Economy, Real GDP Growth Rates (%)

2016-2020 3.9% CAGR

82

83

88

94

98

10

3 10

8 11

3 11

8 1

25

13

3 1

41

14

9

75

100

125

150

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

World GDP (PPP, $Trillion)

f o r e c a s t

100

150

200

250

300

350

400

1980 1985 1990 1995 2000 2005 2010 2015 2020

World Economy, Real GDP Index (1980=100)

Source: IMF

Emerging and developing markets have been and will continue to be the main source of global growth…

82,4

107,9

149,4

19,4

29,3

6,1

12,2

-10

10

30

50

70

90

110

130

150

2008 2009-2014 2014 2015-2020 2020

Emerging & Developing Economies Advanced Economies

World Economy, GDP at PPP ($ Trillion)

Over the next 6 years, world output will

increase $41,5 trillion, more than 70% of

growth will come from emerging & developing

economies

Source: IMF

Despite slowdown in China’s growth performance, it will continue to outperform advanced economies of the US and the EU and contribute to the global growth more…

82,4

107,9

149,4

7,8

10,6

US; 2,6

US; 5,1

EU; 1,6

EU; 4,5

13,6

21,3

2008 2009-2014 2014 2015-2020 2020

China US EU RoW

World Economy, GDP at PPP ($ Trillion)

Average Annual Real GDP Growth (%)

8,6

1,4

0,1

6,3

2,5 1,9

0

1

2

3

4

5

6

7

8

9

10

China US European Union

2009-2014

2015-2020

The rise of emerging & developing economies can be attributed to several dynamics; booming middle-class and increasing export…

Advanced Economies Emerging Economies

Population by GDP per capita and region (% of total population)

50

250

450

650

850

1050

1985 1990 1995 2000 2005 2010 2015 2020

Volume of Exports of Goods (Index: 1985=100) Emerging Economies

Advanced Economies

Source: BBVA Research, UN, WB, IMF

Source: IMF

Robust investment by emerging and developing economies has also driven global growth and will further support it, while advanced economies’ investment relative their GDP has been decreasing…

0

2

4

6

8

10

12

14

1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020

Advanced Economies

Emerging & Developing Economies

Gross Fixed Capital Investment ($Trillion, current prices)

0%

30%

60%

90%

1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020

Advanced Economies

Emerging & Developing Economies

Breakdown of World Gross Fixed Capital Investment (%)

22,0

32,0

15

20

25

30

35

1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020

Advanced Economies

Emerging & Developing Economies

Gross Fixed Capital Investment (% of GDP)

Source: IMF

f o r e c a s t

25%

50%

75%

19

80

19

81

19

82

19

83

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

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

20

15

20

16

20

17

20

18

20

19

20

20

Emerging & Developing economies

Advanced economies

57%

43%

61%

39%

The rise developing world led the gravity of global economy to shift towards emerging & developing economies whose share in the world economy has been gradually increasing….

Breakdown of World Economy, GDP at PPP, %

Recent Developments’ Impact

on

Global Economy

World economy will be affected by several developments…

Source: IMF

Source: IMF

The sharp fall in oil prices will spur global growth, but not enough to offset other

negative factors..

Source: IMF

Oil prices have drastically decreased in recent months and are expected to rebound over the next couple of years..

58

74

0

10

20

30

40

50

60

70

80

90

100

110

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Annual Oil Price* (US$ per barrel) F o r e c a s t

Source: IMF, *Crude Oil (petroleum), simple average of three spot prices; Dated Brent, West Texas Intermediate, and the Dubai Fateh

The drastic fall in oil prices can be attributed to several factors…

Oil prices may rise soon due to increase in global energy demand, partly in response to lower prices, as well as possible supply disruptions caused by escalated geopolitical tensions in oil producing countries..

Fall in Oil Prices

Oversupply

Weak Demand

Increasing US Oil Production (shale oil)

Increasing Iraq & Libya oil production

No decrease in OPEC’s oil production

Energy efficiency in developed countries

Weak economic recovery in Japan & EU

Economic slowdown in China

Appreciation in $ due to expected FED’s decision to increase interest rates

Competition for market share by producers

Potential rise in Iranian oil exports

Appreciation in US$

The main consequences of falling oil prices may vary from country to country…

Main Consequences of Falling Oil Prices

For Oil Importers

Increasing Income Consumption

Low Inflation Low interest rates

Decreasing input cost Investment

For Oil Exporters

Decreasing Exports Revenues

Decreasing budgetary revenues

Increasing cost of oil production

GDP Growth

GDP Contraction

The falling oil prices will have both negative and positive impact on economies across the world with varying degrees according to the level of their dependency on oil…

Energy dependency, Oil imports/exports* as % of GDP 2010-13 average

Source: UNCTAD, The Economist *Including petroleum products such as refined oil or kerosene, †Net imports/exports of less than 0.1% of GDP

Source: Oxford Economics / Haver Analytics

The impact of falling oil prices on global GDP growth could be somewhere between 0.4% and 0.7%...

The low oil prices will have positive and negative impacts on various sectors across the world..

STRONG

NEGATIVE

MILD

NEGATIVE

NO

EFFECT

MILD

PORSITIVE

MODERATE

POSITIVE

STRONG

POSITIVE

Building Materials

(Proppant) Aerospace

Refining &

marketing

Paper/Forest

products Autos Airlines

Exploration &

Production

Regulated

utilities & power

producers (Europe)

Regulated

utilities & power

producers (Asia)

Regulated

utilities & power

producers (US)

Building Materials

(ex proppant) Protein / Food

Oilfield Services Gaming (Asia) Gaming (US) Chemicals Shipping

Steel

(oil country

tubular goods)

Steel

(ex oil country

tubular goods)

Mining

(Base Metals &

Coal)

Consumer

Durables

Lodging Cruise

Manufacturing Restaurants

Surface

Transportation

Homebuilding

(US)

Theme Parks

(US) Retail

Overall impact of low oil prices on global corporate sectors

Source: Moody’s Investors Service

Impact on Emerging & Developing Asian Economies

Lower oil prices may have a positive impact on most of Asian economies, bringing windfall gains in increasing real purchasing power of consumers…

Energy dependency: Oil imports/exports* as % of GDP 2010-2013 average

Oil Price Windfall: Impact on the Oil

Trade Balance in 2015 (% of GDP)

Country Oil Price Windfall

Australia 0.2

Vietnam 0.4

Malaysia 0.7

New Zealand 0.9

China 0.9

Indonesia 1.1

Japan 1.4

Philippines 1.8

Singapore 1.9

India 2.0

Taiwan* 2.1

Korea 2.7

Hong Kong , SAR 2.8

Thailand 5.0

Asia (simple average) 1.7

Asia (weighted average) 1.4 Source: UNCTAD, The Economist *Including petroleum products such as refined oil or kerosene, †Net imports/exports of less than 0.1% of GDP

Source: IMF staff estimates,*Taiwan Province of China Note: Based on 2014 oil trade balance, assuming unchanged quantities and the April 2015 WEO oil price projections for 2015.

Asia’s demographic dynamics will continue to support economic activity in Asia against the ageing population in advanced economies over the next two decades..

Source: UN Note: Advanced Economies are USA, Europe, Japan, Australia and New Zealand; Asia excluding Japan

4 3 2 1 0 1 2 3 4

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 in 2035

4 3 2 1 0 1 2 3 4

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

Advanced World in 2035

65+ 13%

65+ 24%

Source: BBVA Research, UN, WB, IMF

The middle-class revolution in Asia will also support economic activity in the region, triggering more consumption in many areas…

Emerging Asia Change of population (mn) by GDP per capita & region (2000 to 2025f)

Emerging Asia is the largest contributor to the reshaping of the world’s income distribution with a new middle class of 2,7 billion living there

Export-oriented emerging & developing Asia will also benefit from increased economic activity in advanced economies as they are major import sources to the advanced world..

147

129

100

105

110

115

120

125

130

135

140

145

150

2014 2015 2016 2017 2018 2019 2020

Estimated Volume of Exports and Imports of Goods (Index: 2014 = 100)

Source: IMF, Eurostat, International Trade Center *Taiwan Province of China

Emerging & Developing Asia; 29,5%

Japan; 5,7%

Korea; 3,0%

Taiwan*; 1,7%

RoW; 60,1%

Major Sources of US Imports 2014

Emerging & Developing Asia; 36,7%

Korea; 4,2%

Taiwan*; 3,0%

RoW; 56,1%

Major Sources of Japan’s Imports 2014

Emerging & Developing Asia; 26,4%

Japan; 3,2%

Korea; 2,3%

Taiwan*; 1,4%

RoW; 66,7%

Major Sources of EU Imports 2014

Emerging & Developing Asian economies, led by China, are expected to invest robustly over the next five years..

Source: IMF

2,9 3,3

4,0

4,9 5,4

5,9 6,2

6,6 7,0

7,5

8,1

8,7

9,3

0

1

2

3

4

5

6

7

8

9

10

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

China Other Emerging & Developing Asia

Gross Fixed Capital Investment ($Trillion, current prices)

Source: IMF Note: Bangladesh, Bhutan, Brunei Darussalam, Cambodia, China, Fiji, India, Indonesia, Kiribati, Lao P.D.R., Malaysia, Maldives, Marshall Islands, Micronesia, Mongolia, Myanmar, Nepal, Palau, Papua New Guinea, Philippines, Samoa, Solomon Islands, Sri Lanka, Thailand, Timor-Leste, Tonga, Tuvalu, Vanuatu, Vietnam

Thanks to global and regional dynamics, emerging & developing Asia will continue to lead global growth; over the next couple of years, almost half of global growth will come from emerging & developing Asia..

100

150

200

250

300

350

400

450

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

201

1

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

Real GDP Growth (Index: 2000=100)

49,0

107,9

149,4

23,6

19,7

35,3

21,8

2000 2001-2014 2014 2015-2020 2020

Emerging & Developing Asia RoW

World Economy, GDP at PPP ($ Trillion)

Source: BBVA Research, IMF and Quah D., 2011, “The Global Economy’s Shifting Centre of Gravity”.

Growth dynamics across the world will shift world’s economic center of gravity from the Atlantic to the Asia-Pacific region..

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