7HQGHUV5HYLHZ)(%58$5< Ź1Ż 7HQGHUV5HYLHZ)(%58$5< Ź2Ż 7HQGHUV5HYLHZ)(%58$5< Ź3Ż 7HQGHUV5HYLHZ)(%58$5< Ź4Ż 7HQGHUV5HYLHZ)(%58$5< Ź5Ż 7HQGHUV5HYLHZ)(%58$5< Ź6Ż 7HQGHUV5HYLHZ)(%58$5< Ź7Ż 7HQGHUV5HYLHZ)(%58$5< Ź8Ż 7HQGHUV5HYLHZ)(%58$5< Ź9Ż Important Economic Events in The deeepenning eeuurozonee crisis mmaarkedd the yeeaar 22012 whehen many Euuroppean coouuntries eentereed a recces- sionn tecchnicallyy. TThe uneemployymeent raates andd debtedness fi gurees of thee devellooped coountriess reecordded rises. TThe shrinnkking Foorreign demmand caussed Tuurkey’s expports to decclinne. Meaannwhile, Turkeey’s econo- mmic daatata surpriisedd in 20122. The big economic theme of the year was “adjustment.” ence held with Central Bank Governor Erdem Başçı Turkey started 2012 with an infl ation of 10.5 % and cur- and Deputy Prime Minister Ali Babacan rent account defi cit of $77 billion. With the December The symbol was endorsed after a contest, which fi gure, infl ation ended the year at 6.2 %, and the defi cit Erdoğan said elicited about 8,000 submissions. The is $53 billion as of October. prime minister also said the introduction of the new The government’s own projection was 7.4 % in Octo- sign was a new phase in a process of strengthening ber, and expectations were still 7.2 % at the end of No- the lira. In 2005, Turkey created a new currency after vember. But it is important not to get carried away. After removing six zeroes from the lira. all, the plunge in notoriously volatile food prices in the More use of lira in foreign trade last quarter caused the favorable turnout. The use of Turkish Liras in foreign trade increased 24 Besides, this week’s tobacco tax hikes alone are likely % in the fi rst 10 months of the year compared with the to increase infl ation by slightly less than 1 %age point. same period in 2011, reaching $11.1 billion. Lira use in exports was the main driver of the trend, with trade with The discrepancy between expectations and realiza- Germany and Iran leading the transactions. tions is even wider for the current account. The end- year defi cit was projected to be just short of $65 billion The lira was used in $3.7 billion of Turkey’s total $126.3 early in the year. billion exports in the January-October period, accord- ing to the Turkish Statistical Institute data. The total It will likely end up slightly below $55 billion when the value of liras used in exports was $2.9 billion for the December fi gure is released in February. However, same period last year, so the amount has risen 31 %. since the trade defi cit would have been $10 billion larg- Meanwhile, the value of the lira used in imports was er without gold exports to Iran, forecasters have not $7.4 billion among the $195.8 billion total imports in actually been off the mark. the fi rst 10 months of 2012, which was $6.1 billion last The collapse in the current account defi cit can also be year, showing a 20 % raise. Therefore, the use of the attributed in part to the decrease in growth, which is lira in foreign transactions has reached almost $11.1 likely to fall to below 3 %, quite a bit lower than expect- billion, with an increase of 24% ed, in 2012 after 2011’s eye-stunning 8.5 %. Therefore, Fitch upgrades credit note. The agency upgraded Tur- the current account adjustment seems to be much key to its fi rst investment level since 1994. Moody’s more cyclical and one-off than structural and lasting. rates Turkey one notch below investment grade, while In the fi rst quarter Ministers of Finance of Euro Zone S&P puts it a rung lower still. Turkey’s credit note was approved a second rescue package of 130 bln euros upgraded from BB to BBB- on condition that the coun- for Greece. Anxieties were continuing over the state of try manages to reduce its current account defi cit, lower Italy, Spain, Portugal and then Holland entered a pe- infl ation to the targeted level and accelerate growth, riod of recession the international rating agency Fitch announced in a New TTL symbol report. Fitch said they are not expecting an offi cial re- Prime Minister Recep Tayyip Erdoğan announced the cession in the country and that they foresee Turkish new symbol for the Turkish lira (TL) at press confer- growth to be 2.8 % in 2012 and 4.5 % in 2013. 7HQGHUV5HYLHZ)(%58$5< Ź10Ż 7HQGHUV5HYLHZ)(%58$5< Ź11Ż Istanbul Sttock Exchannge Best Instrumennt Method of Deduction of Public receivables no 6322, The Istanbul Stock Exchange (İMKB) gained 52.55 % funds and specialty institutions affi liated with NATO are in 2012, surpassing other investment tools in a year included in the implementation of KDV exemption. when the Turkish Lira also appreciated against the New TTurkish Commercial Code U.S. dollar. The new Turkish Commercial Law was offi cially ga- The Istanbul Stock Exchange (İMKB), which recently zetted in the second quarter covering radical changes became “Borsa Istanbul” after a recent change in the in commercial life. law, was crowned as the most lucrative investment in- The code does not require directors’ physical presence strument with the 52.55 % rise that leveraged 1530 at in board meetings. It allows them to participate through the end of the year liras for investors’ initial 1000 liras. electronic media. Board resolutions can also be ap- Compared to the end point of 2011, which was proved through electronic signatures. The code allows 51,266.62, the bourse reached its record high by clos- the online audio visual gathering of general assemblies ing 2012 at 78,208.44, representing one the largest and the use of online votes during these gatherings. yearly increases in the world. The main sources of the The code contains important provisions for structural rise were the spill-over of the global excess liquidity hanges such as spin-offs, split-ups, mergers and and Fitch’s decision to upgrade Turkey to investment conversions of capital companies. Those provisions, grade, which is likely to boost the Turkish economy. whichare in compliance with European Union legisla- PPetroleeum and naatturalgas drills inn Mede iterraanean tion, are mostly meant to protect the rights and credits Greek Cyprus has approved licenses for the explor- of partners, partnership creditors and employees. atory drilling of oil and gas deposits in four blocks off Speciaal Consuummption Tax (ÖTTV) raaiseedd its shores, Commerce Minister Neoclis Sylikiotis has The Cabinet approved an increase in the Special Con- announced, in a move that may increase existing ten- sumption Tax (ÖTV) imposed on a variety of goods. sions with Turkey in the Eastern Mediterranean. Drill- The ÖTV on motor vehicles, cellular phones, tobacco ing permits were approved for blocks 2, 3, 9 and 11, the products and alcholic beverages has been increased. minister said on Oct. 30. Turkey has protested strongly The decision to increase taxes was taken by he Cabi- against the Greek Cypriot government’s search for off- net following a request by the Finance Ministry. shore oil and gas, citing it as illegal and retaliating with its own exploratory drilling in the breakaway north. The tax rate for motor vehicles with engine volumes higher than 2,000 cubic centimeters was increased Incentivves annnoounnced from 84 to 130 % and will result in a 25 % increase Legal arrangements have been made by Finance Min- in prices. The tax rate on cars with engine volumes of istry as regards KDV (value added tax) implementa- between 1,600 and 2,000 cubic centimeters was also tion on the delivery of goods under certain conditions. increased, producing a 12.5 % price increase. It is reported that KDV exemption has been in force for some international institutions which now cover NATO The ÖTV on cigarettes was increased by 6 % while funds and specialty associations. the tax on alcoholic drinks was increased in rates that varied according to the type and volume of the drink. Changes have been made in the KDV general circular The tax on cellular phones, meanwhile, was increased as offi cially gazetted on 18 August. The general circu- from 20 to 25 %. lar says that certain new arrangements are needed in the value added law implementations and that KDV ex- The new code replaces the internal auditing system emption has been made available for delivery of goods with external and independent auditing systems. With to UN and OECD’s funds and specialties for their offi - there centamendments to the code, the extent of the cial usage and for social and economic aid purposes. obliged companies is limited and the coverage deci- sion is left to the government. Small and medium size The circular also says that explanations have been denterprises will most probably be excluded from inde- made regarding the function of the exemption arrange- pendent auditing, while coverage will be limited to 10 to ment in the KDV general circular serial no 110. With a 15,000 large companies. change valid as from 15 June 2012 with the Law for 7HQGHUV5HYLHZ)(%58$5< Ź12Ż CENTRAL BANK GOVERNOR ERDEM BAŞÇI, DISCLOSES 2013 MONETARY RATE POLICY Ceennttral BBannkk Goveerrnnoor ErE ded m BaBaşçşçı ssaaidd thhaat growth target of 2012 was announced as 4 % , Başçı had not made such a strong emphasis. This, for me, thhiis year’’s innfl aattioon ttaargetet is exxppeeccttedd to bbee ree- is also another source of proof that next year’s growth aallizzeedd veerry ccloosse to the foorreecaasst % aagge ooff 5. policies will be prioritized and infl ation may be sacrifi ced to a certain extent.