Thus, we revised our output gap forecasts for this period upwards. Growth composition became much more balanced as we expected (Chart 12). Despite the weak course of the global economy, exports continued to increase, whereas the demand for imported goods and services maintained a downward trend. Consequently, the contribution of net external demand to growth has been positive for the first time after a protracted period. 6  BIS central bankers’ speeches  Chart 11. Chart 12. Final Domestic Demand  Exports and Imports of Goods and Services  (Seasonally Adjusted, 2008Q1=100)  (Seasonally Adjusted, 1998 Prices, Billion TL)  Source: TurkStat, CBRT. * Estimate. Source: TurkStat, CBRT. Indicators regarding the last quarter of 2011 point that final domestic demand remains flat and the rebalancing process in the economy is going on as envisaged. Owing to the monetary tightening, the growth rate of final domestic demand is expected to remain moderate in the forthcoming period, as suggested by the recent loan and orders data (Chart 13). Accordingly, our inflation forecasts are based on the assumption that domestic demand will decelerate further during early 2012. Chart 13. Chart 14. Growth Rates of Business and Consumer Loans  3-Month Ahead Expectations for Orders  (13-Week Average, Adjusted for Exchange Rate Effect, Annual Percent Change)  (Up-Down, Seasonally Adjusted, Percent)  Source: CBRT. Source: CBRT. As I mentioned at the beginning, global growth forecasts have been revised significantly downwards since the publication of the October Inflation Report mainly owing to the euro area.
It would appear, therefore, that as the economy responds to a gradual improvement in external demand, it may still be constrained by its own rigidities. Removing these obstacles and correcting the resultant imbalances is, therefore, a precondition for achieving more rapid growth, which in turn is the key to accelerating convergence with euro area income levels. 2  BIS Review 154/2009  Faster growth is achievable but depends on … The Roman writer Ovid said that times change and we change with them. That may be so, but what really matters in today’s circumstances is how rapidly we read the signs of the times and adapt to them. I will focus on three directions of necessary change. The first is towards greater competitiveness. The second, and related thrust, would be to promote higher productivity. The third focuses on fiscal consolidation and the pursuit of sound public finances. Before proceeding, however, I should stress that none of these objectives is attainable without further structural reforms, debunking the popular notion that the State has an unlimited capacity to satisfy demands for free goods and services and an end to inefficient practices that involve subsidies. … greater cost competitiveness … First of all, in Malta’s case sustained economic growth depends largely on our ability to attract export-oriented foreign direct investment. Given the past increases in unit labour costs, the only way of maintaining a competitive edge is by ensuring that these costs rise by less than those of our competitors.