Moreover, the high level of foreign exchange reserves, the relatively low inflation environment achieved through tight fiscal and monetary policies and the distance covered in terms of macroeconomic stability are all indications of the changing circumstances. Now, I would like to talk to you about a different dimension of the growth process, which I have already mentioned. Sustainable growth We know that the growth process of the Turkish economy was in the form of an expansion-contraction cycle, especially for the period until 2001. In the past, generally short periods of economic expansion used to be followed by drastic shrinkage. However, the fact that high rates of growth were attained three successive years, following the contraction in 2001, and that the rate of growth for this year is  1  Kaminsky, G.L. ve Reinhart C. M. (June 1999). The Twin Crises: The Causes of Banking and Balance-of-Payments Problems. The American Economic Review, 89, 3, 473-500 and CBRT calculations. BIS Review 36/2005  11  forecasted to be 5 percent show that this cycle has, to a large extent, been broken. Yet, it is not possible to conclude that the Turkish economy has entered a process of sustainable growth. The same as price stability; sustainable growth is a vague notion to the Turkish economy. Sustainable growth can be defined as achieving permanent price stability, building consistency between economic indicators and macroeconomic balances and sustaining growth rates closer to the potential growth level for a period of five years or more.
That is why, the primary surplus is the targeted variable and we set our goals high in order to increase the credibility of the policies, which aim to reduce the ratio of public debt to national income. The high primary surplus target convinces economic units of the possibility of debt rollover as well as reducing public debt, improving expectations and generating confidence. Positive expectations lead to a decline in the risk premium and, as a result, real interest rates and contribute to the stability of the New Turkish Lira. This process is likely to directly affect growth. The most convincing proof of this is the implementation of tight fiscal policy in Turkey for the last three years and the realization of record high growth rates. Now let me touch upon a subject that I frequently come across in the print media and peoples’ comments, which shows there are mixed opinions on macroeconomic policies. In the scope of the entire Turkish economy and the definition of various economic variables such as growth, employment, inflation, debt stock, foreign trade statistics and current account balance, a fact determined not only technically, but also in practice, is that macroeconomic policies cannot affect all these variables  BIS Review 36/2005  15  directly and at the same time. Therefore, setting a figure for each economic variable and defining these as targets is not correct practice within the framework of the market economy.