This development, coupled with the ample and low-cost liquidity injected to the market in line with expansionary fiscal and monetary policies on a worldwide scale, underpinned optimism in global financial markets and led to continued demand for risky assets. Accordingly, risk premium indicators in most developing countries remained lower than pre-crisis levels (Figure 19). As you will recall, on several occasions we have mentioned that Turkey’s sovereign credit rating in the post-crisis period was not commensurate with the actual credit risk level in the market. Actually, in the last quarter of the year, consistent with our discourse and projections, the medium and long-term forecasts for Turkey have been revised to positive; several investment institutions have increased Turkey’s share in their portfolio, and, more importantly, the leading credit rating agencies have upgraded Turkey’s sovereign rating (Figure 20). 8  BIS Review 31/2010  The improvement in global risk perceptions in the last quarter led to the appreciation of local currencies of many developing countries. A similar trend was observed in Turkey too and the relatively stable course of the Turkish lira continued in the last quarter (Figure 21). Distinguished Members of the Press, The third quarter gross domestic product (GDP) release was in line with the outlook presented in the October Inflation Report. While the impact of the fiscal stimulus package on domestic demand weakened, the gradual recovery in external demand continued. Within this framework, the GDP decreased by 3.3 percent in the third quarter of 2009 compared to the same quarter last year (Figure 22).

As inventory de-stocking decelerated in the third quarter of 2009, the pick-up in aggregate demand led to acceleration in demand for imported goods and the contribution of net exports to quarterly growth became negative (Figure 24). External demand conditions will continue to play a critical role regarding the pace of the recovery in economic activity in the forthcoming period as well. As of December, no significant upward revision in growth forecasts for developed countries – as compared to the forecasts in October Inflation Report – is deemed necessary. Within this framework, even if the recently issued data affirm that moderate recovery in exports continues, given the current level of exports and the expected pace of global economic recovery, external demand is not expected to reach its pre-crisis levels for a long period of time (Figure 28). The weak course of external demand would restrain economic activity and employment growth through its impact on industrial production. Indicators such as capacity utilization rates and per capita hours worked across industries suggest that resource utilization remains low throughout the economy. Nevertheless, indicators of the labor market started to recover in the third quarter of 2009. Although the upward trend in unemployment rates reversed in  BIS Review 31/2010  11  seasonally adjusted terms, the unemployment rate is still quite high compared to the precrisis level (Figure 29). The mentioned recovery in unemployment rates as of the third quarter of 2009 was mainly driven by the pick-up in non-farm employment (Figure 30).