Afterwards, as the impact of tax hikes and price adjustments would gradually disappear, inflation is expected to trend downwards starting from the second half of 2010, stabilizing around 5 percent over the medium term. It is critical to note that inflation would be less persistent, and thus economic recovery much smoother, should economic agents take these forecasts as a benchmark in their pricing decisions. It should be emphasized that any new data or information regarding the inflation outlook may lead to a change in the monetary policy stance. Therefore, I would like to underline that the assumptions on the future policy rates underlying the inflation forecast should not be perceived as a commitment on behalf of the CBRT. 4. Risks  Distinguished Members of the Press, In the last part of my presentation, I would like to mention the risks with respect to the inflation outlook in the upcoming period and provide some information pertaining to the probable monetary policy strategy should these risks materialize. BIS Review 143/2009  17  Although recent data releases indicate that the worst is over, concerns regarding the health of the global economy remain. In particular, ongoing problems in credit and labor markets keep the downside risks for global activity on the agenda. Should the global conditions deteriorate again and consequently delay domestic recovery, the CBRT would consider another cycle of rate cuts. The fact that the crisis itself and policy responses are unprecedented in recent history poses risk to the inflation and monetary policy outlook.
The continued run-down in inventories limited production and resource utilization and therefore curbed the effect of the recent rapid growth on inflation. Moreover, high unemployment rates have continued to suppress domestic demand. Accordingly, aggregate demand conditions have continued to support disinflation. Figure 23: GDP  Figure 22: GDP Growth by Periods  (Seasonally Adjusted, at 1998 Prices,  (Percent)  Billion TL) 27  15 9.4  10  8.4  6.2 5.3  7.2  6.9 4.7  5  2.8 0.9  24 1.0  0  21  -5 -5.7  -6.5  -10  -7.0  18  -15  -14.3  12 34 12 3 41 23 41 23 4 1 2 34 12 34 1 2  Source: TURKSTAT. 2009-2  2009-1  2008-4  2008-3  2008-2  2008  2008-1  2007  2006  2005  2004  2003  2002  2001  -20  2003  2004  2005  2006  2007  2008 2009  Source: TURKSTAT, CBRT. On the production side, value added fell year-on-year across non-farm sectors. The 3.1 percent value added in services provided the most negative contribution to GDP growth (Figure 24). On the spending side, the adverse impact of private demand on annual GDP growth substantially decreased compared to two preceding quarters. Meanwhile, the unfavorable trend in private investment expenditures continued in the second quarter and private investment became the demand component that made the most negative contribution to GDP growth (Figure 25).