Medium-term forecasts Current stance, short-term outlook and the assumptions Current stance relating to real sector variables that constitute the basis for the forecasts presented in the previous Inflation Report have been preserved in this Report to a great extent. Despite rapid growth in domestic demand in the last quarter of 2005, the ongoing increase in the ratio of investment expenditures to GDP eased the pressures on inflation imposed by the increase in demand by pushing the production capacity upwards. Moreover, continuing productivity proceeds limited the increase in costs, thus limiting the pressure on inflation. While producing forecasts, the short-term outlook relating to domestic supply and demand conditions was developed in the light of these findings. Real interest and real exchange rate variables, which determine the relationship of supply-demand conditions to inflation and constitute the starting point of the monetary transmission mechanism, are also significant components of the assumption set that constitute the basis for medium-term forecasts. It is assumed that in the current situation, real interest rates are not at a level that can exert pressure on credit increases and demand conditions. Nevertheless, under a main scenario in which the current program will continue to be implemented, macro and political stability will not deteriorate, structural reforms and, accordingly, long-term capital inflows as well as productivity increases will continue, it is assumed that the New Turkish lira will retain its strong position and will continue to support the decline in inflation.
This initiative has seen two six-month extensions and, more importantly, it has been complemented by the introduction of a “common framework” for restructuring the sovereign debt of countries with deep-seated debt problems. Despite the limited quantitative results of the DSSI and the uncertainty surrounding the level of success of the “common framework” for debt restructuring, both initiatives represent an unquestionable improvement on the part of multilateral coordination in sovereign debt resolution. Third, the main multilateral development banks (such as the World Bank, the European 2/4  BIS central bankers' speeches  Investment Bank and the African Development Bank, among others) are also playing an important role in this crisis. Throughout the pandemic, these institutions have deployed a series of emergency measures in line with their mandates and spheres of influence. For instance, their fresh financial support to the Middle East and North Africa (MENA) region since the outset of the pandemic amounts to over USD 8 billion, adding to the USD 4.3 billion of IMF emergency financing and USD 7.2 billion of IMF financing provided through regular programmes. Finally, the recent G7 agreement to back a new global minimum tax rate for multinational companies is a step in the right direction to address the tax challenges arising from globalisation and the increasing digitalisation of economies. Undoubtedly, major steps have been taken in this crisis to strengthen international cooperation, but much ground has still to be covered.