Private sector’s consumption expenditures rose by 36.4 percent in real terms in the period from 2001 to third quarter of 2006, while public expenditures rose by 15.5 percent with the acceleration especially in the last two quarters. Looking at the investment side, we see that the private sector’s investment spending increased by 134.3 percent in real terms while the public investment spending went up by 14.1 percent. The high increases observed in investment spending also indicate that the investment-oriented basis of growth is widening and so the production capacity is increasing. Another resource for growth is the high increase in efficiency. Accumulated efficiency increased by 39.3 percent in the last five years. The high efficiency rates support the growth process without inflation on the one hand and they contribute to the sustainability of growth on the other. The exports have had great contributions in growth in recent years and this contribution keeps growing gradually. The Turkish economy is opening its doors. Accumulated annual exports rose by 167.5 percent as of November 2006 compared to the year 2001. The total trade volume in the last year reached 220.8 billion USD and it constitutes 57 percent of the national income. BIS Review 28/2007  5  Dear Guests, The new structure of the growing process in our country is an indicator of the significance of macroeconomic stability, which lies on the basis of price stability for growth and competition.
It would not be easy to reduce the central government deficit in a situation with declining oil revenues. We might, of course, be fortunate enough to experience a rise in oil prices again, so that we do not have to deal with this problem. Perhaps the oil price is abnormally low at present. But it is important to be aware that the government, in expanding welfare programmes and public sector activities, has not taken due account of the possibility that oil prices will remain low over a longer period. 15  BIS Review 20/1999  We have already witnessed a depreciation of the krone in response to the deterioration in Norway’s terms of trade. This may reflect expectations of continued low oil prices and lower revenues in the long term. This also compromises confidence in the government’s long-term financial position. It is risky to increase expenditure and reduce taxes when there is doubt regarding the long-term balance of the economy. An expansionary fiscal policy could increase uncertainty and the fluctuations in the exchange rate, and reduce Norges Bank’s freedom of manoeuvre. On the contrary, fiscal policy should be oriented to provide room for lower interest rates that can counter a cyclical downturn in an environment of stable wage and price inflation. The authorities must be very cautious about further embedding fixed long-term priorities in the central government budget.