Yet, I would like to remind you that working day losses caused by the holiday in September will make it difficult to track the underlying trend in production as in July. Despite weaker domestic demand, growing EU demand continued to bolster Turkey’s exports in the third quarter. Turkey’s market shifting flexibility continues to cushion exports against the negative effects of geopolitical tensions on external demand. We expect domestic demand and economic activity to recover starting from the last quarter of 2016. Thanks to more accommodative monetary conditions and other measures, the recovery in consumer loans in recent months support our projections of improvement in the last quarter. Against this background, we envisage that the economic growth will be mild in 2016, which is marked by consecutive adverse shocks. In view of waning uncertainties in the upcoming period, we assess that producer and consumer confidence will be re-built, demand-stimulating policies will support consumption expenditures and negative contribution of net exports will fall, which will all contribute to economic recovery. In addition to the partial improvement both in tourism revenues and exports to Russia in the normalization process, we envisage that the recently released incentive packages will contribute to growth next year. On the other hand, uncertainties regarding the pace of global growth and monetary policies of advanced economies as well as the course of capital flows and geopolitical developments pose a downside risk to growth.

This is because the current labour market set-up discourages people from spending longer in education since it fails to differentiate  BIS Review 151/2009  5  appropriately between skill levels, leaving the young facing temporary contracts or unemployment, with the adverse effects I have already mentioned. It is also essential to move to boost the knowledge economy so that it may contribute to strengthening technological capital and to bridging the gap afflicting the Spanish economy in this field. This should be done in parallel with pertinent measures to further the liberalisation of goods and services markets, the current regulation of which involves in some cases a diminished level of competition. One key area for progress along these lines is liberalisation in the services sector, as it encompasses some of the most dynamic activities and some of those with most job-creating capacity. Likewise needed is further headway in liberalisation and competition in the network industries, so that the conditions in which inputs are supplied to other productive activities allow Spanish companies to compete on an equal footing with our trading partners. And let us not forget the housing market. Further improvements to rental regulations are needed to make this option more flexible and profitable, so that the purchase of housing for investment purposes is encouraged, thus helping reduce the supply overhang, and broadening the possibilities of meeting the population's demand for residential services. Finally, I must reiterate that the soundness of the financial system is essential for ensuring the financing flows needed to restore economic dynamism.