Monetary
Program
Monetary Policy
Monetary policies implemented by the Turkish Central Bank, which
is in line with the inflation target, were also crucial in bringing
down inflation. There had been double-digits inflation in Turkey
for more than three decades. The fact that inflation has been brought
down despite a high growth rate is a landmark success.
As a result of the strict economic program, inflation was cut down
to single-digits last year. For 2004, the year-end target rate of
inflation was set at 12%, but realized as 9.32%. In 2005, the inflation
rate in terms of consumer prices’ indexes (CPI) was contracted
7.72%; and, 2.66% as of producer prices’ indexes (PPI). The
CPI inflation rate in 2006 was realized as9.65 %, and the PPI inflation
rate as 11.58% .
The Central Bank of Turkey predicts that CPI inflation in 2007 will
be 8.2 % and 4.6% in 2008.
Fiscal Discipline
These developments owe much to fiscal policy of recent years. Turkey
has been extremely careful with its budget for the last two years.
Peaked to 17% in 2001, the budget deficit to GNP ratio was less
than 1.7% in 2005, 0.7% in 2006, and 1% in 2007.
Turkey is currently in the midst of an IMF-led austerity program
that relies primarily on fiscal restraint. In this vein, fiscal
discipline was the key policy instrument behind the successful results
in the economy during the last three years. With a very strong fiscal
policy, net public debt to GNP ratio declined to 50.5% in 2006 from
90.5% in 2001. The composition of the debt stock has also been improved
and become more resilient to fluctuations in interest and exchange
rates.
Reserves
Despite the widening of the current account deficit, which has
been driven mainly by the gradual increase of imports, Turkey’s
international reserves have continued to increase steadily as well.
Jump in portfolio and FDI inflows are the key factors behind the
strong reserve position. The total assets of the Turkish banks have
amounted to USD 350 billion.
The foreign capital in the Turkish banking sector which was only
4% in 2004 has now reached 20%. International reserves of the Turkish
Central Bank have gradually increased. As of October 2007, it has
exceeded USD 70 billion which ensures the strength of the Turkish
economy against possible fluctuations in domestic or international
markets.
Monetary Policy Reports:
2005-III 
2005-II
2005-I
2004-IV
2004-III
2004-II
2004-I
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for further information from the Central Bank of the Republic of
Turkey
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