The growth rate we attained with the high inflation in the 1980’s did not last long and had been replaced by higher inflation rates and economic recession. Meanwhile, between 2002 and 2007, high growth rates were attained while a remarkable decline was recorded in inflation. In this scope, we are of the opinion that the monetary policy implemented by the Central Bank of Turkey, which is consistent with the main objective of price stability, has supported the establishment of price stability in Turkey and contributed to the permanent increase of the competitive power of the whole economy and the exports sector. I would like to emphasize that the quality of fiscal adjustment is crucial for both the struggle with inflation and the permanence of the high growth rates. The fiscal rule, which is to be enforced in the near future will enhance predictability and create confidence for the future. Fiscal rules play a critical role in the establishment of fiscal policies consistent with sustainable debt dynamics and foster a more prudent and permanent implementation of fiscal discipline. However, in the light of country experiences, in order that fiscal rules can function as expected, these rules should be implemented in a transparent way as per the required institutional and legal framework to be established. 5. Exchange rate  As you may have noticed, in my speech regarding how to increase the potential growth rate of Turkey, I have not mentioned the issue of foreign exchange rates.
The global economy has displayed a mild recovery since the second half of 2009. Yet, European economies have recently shown signals of deceleration. Although problems in the credit markets of advanced economies have attenuated, they have not been completely eliminated yet. As a matter of fact, credit developments in the USA and the Euro area suggest no significant increase in credit volume. The unresolved issue of troubled assets in  BIS Review 104/2010  1  the banking sector of advanced economies impedes proper functioning of the credit mechanism. Meanwhile, soaring and persisting high unemployment rates in many countries reduce household expenditures and negatively affect the aggregate demand. Soaring budget deficits and public debt stocks stemming from loose fiscal policies implemented in developed countries are an important risk factor that may adversely affect private demand by increasing long-term interest rates in the years ahead. The risks that I have mentioned above also have the potential to affect the Turkish economy in a negative way. Considering that our largest exports market is the European Union, problems prevailing in European economies pose an important risk for our economy, too. As a matter of fact, external demand indicators have recently indicated a partial slowdown. Global turbulence also has the potential to affect the Turkish economy negatively through the channel of expectations. Problems in the global financial markets are likely to restrain the accessibility of external financing.