Survey indicators point to a continued strong course in external demand in the manufacturing industry. The ratio of exports to imports reached a high plateau of some 85%. In the first half of the year, the real balancing in foreign trade is quite evident. Against this background, we expect that the current account will post a surplus in the rest of the year due to the strong upward trend in exports, and stimulus to tourism from the progress in the vaccination program. Turkey has gradually reduced its foreign trade deficit with Europe, but continues to run a deficit in trade with Asia. At this point, I would like to reiterate that the swap agreements we have made as the Central Bank essentially aim to facilitate trade in local currency. Distinguished Guests, Now, I would like to touch on the inflation outlook. Last Friday, August inflation data were released. Annual inflation increased by 0.30 points to 19.25%. In this period, the annual inflation rate of the B index, which is a core inflation indicator and obtained by excluding unprocessed food, energy, alcoholic beverages and tobacco from the CPI, decreased by 0.05 points to 18.46%, and that of the C index, which excludes processed food from the B index, declined by 0.46 points to 16.76%. In August, while annual inflation increased significantly in the food group, it posted a limited rise in services and receded across other main groups. Meanwhile, producer inflation continued to increase due to commodity prices, disruptions in supply chains and demand conditions.

For instance, structural factors such as slowing of crop yield growth, fast population growth and higher income elasticity for food in developing countries would continue to support higher food prices. Policy markers would therefore need to pay attention to these developments in calibrating the appropriate degree of monetary tightening. 7. Thirdly, there is also a need to diversify the sources of growth for the region, in order to generate sustainable growth and redress global imbalance. In this regard, it is worthnoting some encouraging developments that are underway in the region. The first one is the deepening intraregional trade and increasing orientation towards domestic consumption. The robust economic growth of the regional economies over the past year has mainly been propelled by strong domestic demand, while the contribution from net exports was either small or negative. In fact, the aggregate trade balance of the region has been gradually declining since 2007, and if intra-regional trade is excluded, it has declined notably from about 4% of the regional GDP in mid-2007 to less than 2% at end-2010, the lowest in more than a decade. This gradual change in trade pattern, with regional economies shifting their export markets from deficit countries like the US to surplus countries in the region, has also been contributing to global rebalancing. 8. We also should not overlook the positive attributes of capital flows. While challenging to manage, capital inflows present important opportunities for boosting broaderbased growth. The key is to channel the capital flows into good uses, and particularly towards productive investments.