Message of CEO

Sinpaş Group Chairman Avni Çelik’s Vision in 2013
What is waiting us in 2013?
To summarize our expectations about 2013 economic activities, which was formed in line with middle term plan estimates of public authority declared in 9 October 2012; we can say that growth will be around 4%, inflation will be around 5.5%, pre capital income will be around 11.300 Dollar in 2013 in Turkey with normal conditions. Domestic demand will be the real source of growth. Current account balance will be similar to 2012, around 7% and, there will not be a decrease in the value between USD/TL except the effect of inflation. Even there is a probability for Turkish Lira to gain value.

Another important point is Public sector’s borrowing requirement’s rate to GDP will be around 1,49% in 2013, which is a decrease according to 1,73% of 2012. The discipline of Turkish public finance is very important considering loan crisis in the world. This can cause TL interest rates come down a little more.

Construction sector is a highly sensible sector. It grows rapidly with general economic growth, but slows down more than average at times of deceleration. We saw it 2012 once more concretely. Besides, construction sector is strategically important too; as it affects more than 130 sub sectors and creates employment. Housing production, as a sub category of Construction sector, has a social aspect too due to urban transformation need in Turkey.

2013 Sinpaş projection
As Sinpaş Group, our target is production and sales of approximately yearly 3000-3500 dwellings. This number is quite moderate as our average total sales in the last 4 years is 450 thousand dwellings. For 2013 year, our growth rate target in endorsement is 20% for Construction group, 30% for Industry Group and 7% for Service group.

On the other hand there are some uncertainties which make the work of the sector more difficult. The most important of them is the expected regulation about VAT rates. Another one is reciprocity principle created a frame to increase sales to foreigners but long term dwelling permission should be dealt with immediately. It is also not clear how will the new regulations of the consumer law will affect the sector. If we get on with these issues at the beginning of 2013, this will add to an economically successful year.

What are the risks in 2013?
We can gather possible risks in 2013 under two groups:

The first group risks will be developments which will directly influence current account balance of Turkey, that is TL Foreign Currency equilibrium and interest rates:
- Growing of the crisis in Europe where we do most of our exportation; The possibility for France to become like Italy, Spain and Greece.
- Growth of current problems in alternative geographies while diversify our exportation. For example our gold exchange with Iran can affect our relationship with the USA. Conflict between North and South Iraq can turn into a close combat. Problems in Syria can be reflected to Turkey directly.
- More importantly, increases in oil and gas prices can make negative influences due to our energy dependence. Our tourism incomes can be affected too.

Second group risks are developments which will directly ruin discipline in Public Finance:

- Increasing additional tax burden can slow down the economy while general economic slowdown continues
- Probable increases in public expenditure in the approaching elections can raise to high levels and inflation and interests can increase
- Additional expenses can occur due to political developments around Turkey and fiscal deficit can be higher than the proposed one
Although there is no reason to be pessimistic, we have to be careful in 2013.

How should investments be in 2013?
It is very important to give long termed and balanced investment decisions. It will be possible to see in the predictable period that dollar and euro liquidity will be high, interest rates will be low and if the base scenario becomes real, TL will gain value in the real terms. So TL investments should be more. On the other hand, as a developing economy with a high performance, leader companies in Turkey will grow in a profitable way. Consequently, it will be meaningful to leave a part of long term source at stocks as investment. Composition of investment and selection of assets will naturally change according to risk/profit profile of the investor.

Fast population increase in Turkey, urbanization, renewal necessity for buildings under earthquake risk and raise in welfare due to perfect increase in national income will create a serious lever effect for the housing sector. Serious price increases can be seen at housing and commercial buildings. As decline trend in interests will also whip demand, peak investment tool of 2013 should be real estates.

Yours sincerely,

Avni Çelik
Sinpaş REIC AŞ.
Civil Engineer
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