In early 2009, the effect of the global crisis on world economies deepened, world trade volume fell to historic lows, almost all countries suffered economic contraction, unemployment rates soared; in brief, the world had faced the possibility of an economic depression of such dimensions for the first time since 1929 – as a result of which the fears of a global and prolonged depression peaked. 2  BIS Review 79/2010  In order to recoup the significant contraction in demand that emerged due to the decrease in the private sector’s total investment and consumption expenditures, governments and central banks have prepared historically extensive and comprehensive stimulus packages. The scope of the crisis and the economic contraction became worldwide in a short while, which necessitated the timely implementation of measures in coordination with other countries. Public resources that were allocated to the financial sector and the stimulus packages that were put into effect during the crisis have brought significant burden on public budgets. Research conducted by the International Monetary Fund indicates that the total amount of capital transferred to the financial sector was USD 4 trillion; state purchases to prop up securities markets amounted to USD 6 trillion; state guarantees to financial institutions and the corporate sector became USD 14 trillion; and fiscal measures such as tax rebates and new public spending reached USD 6 trillion. As of the second half of 2009, we entered the fourth and last stage of the crisis.
Putting the structural reforms that would remedy chronic problems in the labor market into practice immediately would prevent unemployment rates, which climbed during the crises, from becoming permanent and support potential economic growth. The lending appetite of banks significantly decreased due to the decline in risk appetite accompanied by the erosion of confidence and elevated uncertainties during the crisis. However, we can assert that there are favorable developments thanks to policy rate cuts made since November 2008 and the improvement in global risk perceptions. Especially the most recent developments suggest that there is an apparent improvement in Commercial Loans. The rise in loans extended to SMEs, which have an important share in the labor market, indicates that there is moderate recovery in economic activity. The NPL ratios, which saw all time highs during the crisis, started to decrease, albeit slowly and gradually. To sum up, the upward trend in bank loans, which started in the second quarter of 2009, continues on a stable course. As you all know, the impact of the global economic crisis on financial markets was terribly severe in the last quarter of 2008: countries’ risk premia saw record-high levels and excessive volatilities occurred in the currencies of many developing countries. Despite having been volatile at historically high levels and extremely sensitive to the global risk appetite, the Turkish lira displayed a relatively stable course, which lasted through the first quarter of 2010 following the peak of the crisis.