Our assessment is that growth in 1997 will amount to approximately 2 per cent, followed by 3 per cent in 1998. BIS Review 68/1997  -4-  Inflation in line with the target The path of inflation largely depends on growth in relation to the economy’s long-term potential output - in other words on how the gap between actual and potential output changes - as well as on the inflation expectations of different economic agents. The Riksbank considers that 5 per cent growth in the coming years is compatible with low inflation, mainly because in general the economy has plenty of unutilised capacity. In other words the output gap, which is affected by, for example, the labour market situation, is not expected to close in the coming years. Structural changes and increased competition in several fields suggest that the Swedish economy’s inflation propensity has fallen. Deregulation has been carried out in transport and communications, for instance, and to some extent in the food sector. EU membership has had positive effects for competition in Sweden, partly via increased competition from imports. The new competition laws have also helped to strengthen competition. Changes of this type, as everyone knows, are positive in that they pave the way for lower consumer prices. Another consequence that is less evident and therefore worth underscoring is that, in so far as the changes affect the outlook for inflation, they can provide room for a somewhat less tight monetary stance.
After focusing on the developments in inflation and our policies regarding interest rates and exchange rates, now I would like to talk about the growth of the Turkish economy. As you all know, the Turkish economy has been displaying a high growth performance for the last four years. Since 2001, cumulative real growth has been 35.1 percent, whereas the average annual growth has been 7.8 percent. The point that stands out in the growth figures is that growth is led by the private sector and that the investment-originated base is growing. In the 2001-2005 period, investment expenditures of the private sector increased by 105 percent, while those of the public sector increased by 15.5 percent. On the consumption side, expenditures of the private sector increased by 30.3 percent in the same period, whereas those of the public sector increased by 5.9 percent. These developments indicate that the ongoing strong investment trend enhanced the growth potential and that the dynamics and actors of growth changed parallel to Turkey’s structural change process. Growing with public resources is no longer the case. In this respect, it is clear today that the public sector assumes and should assume, a strong supervisory and regulatory role in the framework of good governance principles. This is emphasized evidently in the Ninth Development Plan Strategy, which comprises the period between 2007 and 2013.