Dear Guests,
As you all may know, the Turkish economy used to experience boom-and-bust cycles throughout the 1990s. The economic crisis in 2001 was the low point of this period, when the economy contracted more than 5 percent. Since then, Turkey has put in place a very intense and ambitious structural reform agenda, coupled with sound monetary and fiscal policies, to establish macroeconomic and financial stability and to improve the business environment.
Central Bank independence that was granted by Law in 2001 was one of the milestones of this agenda. The introduction of free-floating exchange rate regime in 2001 and inflation targeting regime in 2002 were other key steps. The Central Bank of Turkey has also experienced a comprehensive institutional change towards a better communication policy and clearly defined accountability measures.
We have experienced a significant disinflation process since 2001. The consumer price index came down from 68.5% in 2001 to 8.4% in 2007. I should call your attention to the fact that the list of countries that lowered inflation in 2007 was quite short, thanks to global inflationary pressures in food and other commodities. In fact, the average inflation around the world increased from 3.5 percent in 2006 to 4.8 percent in 2007 and to 5.5 percent in January 2008. In this environment Turkey was able to reduce inflation by 1.3 percentage points in 2007. In fact, this was the sharpest drop among 60 major developed and emerging countries.