0 9, 0 - 0, 5 - 1, 0 - 1, 0 - 1, 5 - 1, 5 01. 16 0. 25 0. 5 0, 0 - 0, 5 term ( year ) source : bloomberg. 02. 17 9, 5 0, 5 0, 0 01. 17 10, 0 1, 0 0, 5 12. 16 10, 0 1, 5 1, 0 11. 16 10, 5 10. 16 10, 5 2, 0 1, 5 09. 16 11, 0 2, 5 2, 0 08. 16 11, 0 3, 0 2, 5 07. 16 11, 5 3, 5 3, 0 06. 16 february 3, 2017 11, 5 3, 5 05. 16 january 9, 2017 04. 16 12, 0 03. 16 12, 0 02. 16 ( treasuries, percent ) source : cbrt, bloomberg. were these policies effective? more time is needed to assess the ultimate impact, but the initial response is encouraging. turkish lira, which has depreciated relative to peer currencies in the second half of 2016, has stabilized after the policy tightening, partly containing the upside risks on the inflation outlook ( figure 15 ). figure 15. tl and em currencies against usd ( 01. 01. 2016 = 1 ) emerging markets average turkish lira 1, 45 1, 40 coup attempt moody ’ s downgrade us election cbrt policy response 1, 45 1, 40 02. 17 01. 17 12. 16 11. 16 0, 90 10. 16 0, 95 0, 90 09. 16 1, 00 0, 95 08. 16 1, 05 1, 00 07. 16 1, 10 1, 05 06. 16 1, 15 1, 10 05. 16 1, 20 1, 15 04. 16 1, 25 1, 20 03. 16 1, 30 1, 25 02. 16 1, 35 1, 30 01. 16 1, 35 emerging markets include brazil, chile, colombia, hungary, indonesia, malaysia, mexico, philippines, poland, romania, s. africa. source : bloomberg. the policy we adopted has been also effective on the volatility indicators. the last figure i would like to show you pertains to the volatility in the fx market ( figure 16 ). as you can see, the implied volatility of turkish lira has moved up sharply in early

exports is expected from the european demand. turkish exports are highly sensitive to the demand from europe which constitute more than half of our total exports. latest projections suggest that eu demand will continue to support turkish exports in the forthcoming period ( figure 6 ). moreover, recently improved relations with our neighbors have also started contributing to the export growth again after a long stagnation period. recently, there is some slight recovery in exports to our main major trading partners such as iraq and russia. the recovery process is expected to continue throughout 2017. overall, we anticipate a sizeable contribution from exports to growth in 2017. figure 6. exports to eu and eu ’ s final domestic demand eu's final domestic demand ( billion € ) exports to eu ( 2010 = 100, right axis ) 2017 * 2016 * * forecast. source : eurostat, ihs cbrt. another factor that will lead to an improvement in exports and current account balance is the depreciation of the turkish lira. as of january, the real effective exchange rate index has fallen to 88. 2, which is the historically lowest level in the past 15 years ( figure 7 ). the most recent data show that export growth has been outpacing import growth and we expect this picture to become more evident during the first half of 2017. figure 7. real effective exchange rate ( cpi based, 2003 = 100 ) 01. 17 01. 16 01. 15 01. 14 01. 13 01. 12 01. 11 01. 10 01. 09 01. 08 01. 07 01. 06 01. 05 01. 04 01. 03 source : cbrt. regarding external finance, current account deficit is financed predominantly by fdi flows and long term borrowing ( figure 8 ). most recently, we still see a sizeable contribution from fdi and long term borrowing by banks and non - financial corporates, whereas portfolio inflows have been relatively weak. the share of long term debt in total debt has been increasing steadily. the banks and firms are able to roll their debt comfortably, and the roll - over ratios are still above 100 %. figure 8. financing of current account deficit ( 12 month cumulative, billion usd ) - 20 fdi and long term portfolio and short term cad 11. 16 02. 16 05. 15 08. 14 11. 13 02. 13 05. 12 08. 11 11. 10 02. 10 05. 09 08. 08 11. 07 02. 07 - 40 * long term in