Durmuş Yılmaz: Recent economic and financial developments in Turkey Speech by Mr Durmuş Yilmaz, Governor of the Central Bank of the Republic of Turkey, at the press conference for the presentation of the Inflation Report, Ankara, 30 April 2009. *  *  *  Distinguished Guests and Members of the Press, Welcome to the press conference for the presentation of the April 2009 Inflation Report, one of the most important communication tools of the inflation-targeting regime. The report typically elaborates global and domestic macroeconomic developments and presents the medium-term inflation forecasts revised in line with the previous quarter developments. It also presents six boxes examining the recent monetary policy decisions and the relevant economic developments. Now, I would like to give you a short summary of our evaluations and the Central Bank’s revised inflation forecasts in the Inflation Report, which will be posted on the CBT website today. 1. Inflation developments  Distinguished Members of the Press, The world economy has been undergoing a period dominated by dynamics quite unlike to those of previous years. With the loss of confidence resulting from the on-going financial crisis, the global economy entered a significant contraction trend after a long period of time. Impacts of the crisis on real economic activity deepened in the first quarter of 2009. Thus, inflationary pressures, which were perceived as a major concern until the last quarter of 2008, were overtaken by fears of deflation in developed countries in the first quarter of 2009.
The lagged effects of dips in international oil prices had a favorable impact on transport services in the first quarter. Rental price movements remained quite below the averages of previous years due to the contraction of domestic demand. The prices of the restaurants and hotels group also followed a similar course owing to shrinking demand and decelerating food prices (Figure 5). I would particularly like to draw attention to the decrease of annual rent inflation. Seasonally adjusted data point to a continual and accelerating downward trend in rents in the first quarter of the year. The slowdown in services prices is expected to continue in the upcoming period as well. BIS Review 67/2009  3  Figure 4: Services Prices  Figure 5: Services Prices  (Annual Percentage Change)  (First Quarter Percentage Change)  Other Services Transportation Services Rent Restaurants and Hotels  21 18  6 2006-2007 Average  2008  2009  5 4  15  3  12  2  9  1  6  0  3 0  -1 -2  03 05 07 09 11 01 03 05 07 09 11 01 03 07 07 07 07 07 08 08 08 08 08 08 09 09  Source: TURKSTAT, CBT. Other Services  Transportation Rent Services  Restaurants and Hotels  Source: TURKSTAT, CBT. The first quarter saw a significant decline in the prices of durables excluding gold (Table 1).