Then, I will outline the Central Bank’s inflation forecasts presented in the Inflation Report that will be posted on our website shortly. In the first quarter of 2010, as perceptions regarding recovery in the global economy became more pronounced, the trend of increase in risk appetite in global financial markets continued. Accordingly, as had been the case since the second half of 2009, emerging markets attracted more capital through increased portfolio movements. On the other hand, risk premium indicators in most developing countries remained below those of pre-crisis levels. In  this period, Turkey’s risk premium indicators continued their positive trend and did not differentiate from the general trend except for short periods when developments specific to our country were pronounced (Figure 21). The improvement in global risk perceptions in the first quarter led the currency of many developing countries to appreciate. In terms of changes in currency values, the Turkish lira did not significantly differ from currencies of other emerging markets in this period and the relatively stable course of the Turkish lira in the crisis period continued throughout the postcrisis process as well (Figure 22). National income data of the last quarter of 2009 were consistent with the outlook we presented in the January Inflation Report. In this period, while the mild recovery in private sector demand continued, public sector consumption expenditures increased more than envisaged due to temporary factors. Meanwhile, persisting problems in the global economy restricted foreign demand, whereas stock accumulation started, albeit slowly, along with the improvement in domestic demand.

The economic upturn is broad-based. At the beginning of the recovery, activity was primarily fuelled by private consumption, traditional exports and petroleum investment. In addition, growth in mainland fixed investment has gradually gained considerable momentum. Monetary policy easing and low inflation have resulted in strong growth in household real disposable income. Private consumption and housing investment have risen sharply. House prices have continued to rise. Debt growth remains high. The economic upturn has continued this year. High petroleum investment, the international upturn and higher commodity prices have boosted production and earnings in the manufacturing sector. Statistics Norway’s business tendency survey points to continued favourable prospects for Norwegian manufacturing. In service industries and the construction sector, continued low interest rates and strong growth in household demand are expected to result in a further increase in activity in the near term. Capacity utilisation in the Norwegian economy now appears to be close to a normal level. In manufacturing, capacity utilisation has been close to its historical average. According to Norges Bank’s regional network, about 40 per cent of enterprises will have some or considerable difficulty in increasing production. The situation in the labour market does not indicate that substantial pressures are building up in the Norwegian economy as a whole, even though growth has been high for a fairly long period. So far, the rise in the number of employed has been fairly modest in relation to output growth. This may be due to lagged effects of the sharp fall in sickness absence through 2004.