ahap Kavcolu: Recent economic and financial developments in Turkey Speech by Mr ahap Kavcolu, Governor of the Central Bank of the Republic of Turkey, at the Istanbul Chamber of Industry Meeting, Istanbul, 29 July 2022. *** Distinguished Members of the Istanbul Chamber of Industry, I would like to thank you for your invitation to the regular July meeting of your Assembly, which is among the leading representative councils of our country's industrial sector with its history of 70 years and more than twenty thousand members. I am pleased to meet with you here today. I will start my speech by giving a brief account of the developments regarding the macroeconomic outlook. Then, I will talk about the structural transformation that our country is going through. After sharing with you the Central Bank's contributions to this important transformation, I will leave the floor to you. Esteemed Participants, Geopolitical risks that increased in the first half of the year, and energy problems, supply constraints, and supply chain disruptions due to the lingering effects of the pandemic have led to negative consequences on a global scale. However, recently, there has been a partial improvement in energy and commodity prices as well as in supply conditions and lead times. In this context, lead times in emerging economies have improved considerably in recent months, and significantly converged to their normal levels. Meanwhile, lead times in advanced economies have remained elevated despite some decline.

Our country posted a very successful and strong economic activity performance during the pandemic compared to other countries. As you know, economic activity in many countries declined in that period, and growth in many economies remained close to zero. However, the Turkish economy, which normalized rapidly in the succeeding period, ranked among the top economies in terms of high growth rates. Accordingly, our economy grew by 11% in 2021, posting a very strong growth performance compared to other countries. The conflict between Russia and Ukraine that started in the first quarter of 2022 aggravated the effects of ongoing negative supply shocks and increased the uncertainties. Nevertheless, domestic economic activity remained strong in a sustainable and uninterrupted framework despite negative supply shocks. Accordingly, the annual growth rate stood at 7.3% in the first quarter of 2022. We expect that growth will also be close to this rate in the second quarter. Net exports and machinery-equipment investments have a very remarkable share in this strong growth. On the expenditures side, net exports have contributed positively to growth for the last five consecutive quarters. Machinery-equipment investments have  1/5  BIS - Central bankers' speeches  also made an uninterrupted positive contribution to growth in the post-pandemic period. On the production side, the services and industrial sectors continued to contribute to growth. We see that machinery-equipment investments continue in a sound and sustainable framework. Investments that support productive capacity, particularly machineryequipment investments that drive industrial output, point to a stable and strong growth.