Even before recent upward revisions in GDP figures, Turkey easily met the Maastricht criteria for the budget deficit and debt stock. Turkey has demonstrated significant improvement in the World Bank’s Governance Index since 2000. Thanks to better governance practices, competitiveness of Turkish economy has advanced drastically in recent years as well. In the last two years, Turkey moved up a total of 18 steps in the Global Competitiveness Index prepared by the World Economic Forum. Turkey also moved up 34 steps compared to the previous year in the Ease of Doing Business Index of the World Bank. Distinguished guests, I tried to highlight some of the important developments in Turkey regarding economic governance in recent years and the resulting improvement in the economic structure. All these led to improvement in the confidence, which was instrumental in further confidence building and credibility for the economic management. These are all key ingredients of good governance. These achievements, however, are not enough. We still have much to do in terms of reaching price stability and securing sustainable high growth rates. There is still much to be done to improve economic governance and to reach a level compatible with the EU-15 average. As we are going through difficult times both internally and externally, we should not lose the momentum gained in institutional capacity building. It is even more imperative at this juncture to show and utilize the dexterity that we gained from our past experiences.
In the absence of independence, the Central Bank of Turkey would not be able to focus on its primary objective of price stability. Introduction of the free-floating exchange rate regime in 2001 and formal inflation targeting regime in 2006 can be classified as the other two key steps. The inflation targets became the new anchor instead of exchange rates and the Central Bank has started using overnight interest rates as the main policy tool to reach these targets. Communication tools of the central bank have played a key role in explaining the price developments and the monetary policy outlook to the public and also in managing expectations. The Bank’s communication policy has become more effective over time with the introduction of new communication tools, such as the quarterly inflation reports since 2006, the bi-annual financial stability report since 2005 and the monthly price development reports since July 2006. In addition, a summary of Monetary Policy Committee meetings are published on our website within 8 business days following the Committee meeting, simultaneously in English and Turkish. I believe all of these instruments have contributed to a more transparent monetary policy. After briefly touching upon the main features of the monetary policy in the context of good economic governance, I will continue with the fiscal side. The prudent fiscal policy that has been implemented since 2002 has made significant contributions to the disinflation process and the economic growth. The ambitious primary surplus targets are at the center of the improvement in fiscal policy.