On the Turkish economy side, this led to appreciation of the Turkish lira against major currencies, which limited the adverse effect of import price hikes on unit costs. In the third quarter of 2009, despite the upward inflationary pressure from tax adjustments to restore fiscal balance, the annual rate of change in consumer prices maintained its downward pace due to declining course of the underlying trend. By the end of the third quarter, the inflation rate continued to remain below the target-consistent-path. Annual CPI Inflation and the Target-Consistent-Path (A nnual P ercentage Change)  12 10 8 6 4 2  Annual CP I Inflatio n Target Unc ertainty Band  0  Source: TURKSTAT, CBRT. 33. In the last quarter of 2009, in line with our projections, both domestic and external demand, one of the factors that affect the underlying inflation trend, maintained their pace of moderate recovery, and resource utilization in the economy continued to remain low. Yet, inflation was up by 1 percentage point from October Inflation Report projections due to the highest increase in unprocessed food prices of the recent past. Consequently, inflation remained slightly below the target at end-2009 with 6.53 percent, yet remained within the uncertainty band. 34. An analysis of inflation developments in 2009 by subcategories suggests that annual inflation slowed down in all main categories excluding food and energy for which tax adjustments were effective. Although food price inflation remained low relative to recent years, among all subcategories, the biggest contributor to overall inflation has been food prices.
Source: Ministry of Finance, Medium Term Program (2010-2012). 28. The determined implementation of fiscal discipline in Turkey since 2002 has helped cut the ratios of government budget deficit and debt to GDP, to a level well below the average of both advanced and emerging economies. Although Turkey’s budget deficit expanded at a faster pace than in many other emerging economies in 2009, according to the MTP projections, government debt stock is likely to remain below the average of other emerging economies in the upcoming years. 10  BIS Review 68/2010  General Government Budget Deficit and Debt Ratio Average Values in Advanced Countries and Turkey  Average Values in Emerging Countries and Turkey  (Percent of GDP)  (Percent of GDP)  100  Aver age of A dvan ced Cou ntrie s**  80 2 008 70 2 003  2003  60 50  20 12  40 2 008  2003  2 003  60 55 2012 50 2 008  45  2012  40  Tur key  Tu rkey  2008  30  35  -2  0  2  4  6  8  10  Budg et D eficit  *Dashed lines indicate forecasts. **Includes USA, UK, Germany, France, Spain, Ireland, Iceland, Japan, Portugal, Israel, Greece, Italy, Austria, New Zealand and South Korea. Source: IMF. Turkish data is taken from the Ministry of Finance, Undersecreteriat of Treasury, Medium Term Program (2010-2012) and Program for 2009. 29.