an expansionary rather than contractionary impact on economic activity. in sum, while turkish economy contracted sharply during the recent crisis, its well capitalized and sound financial system is likely to support the economic activity along the recovery. in fact, recent gdp releases suggest that economic activity in turkey displayed a solid rebound in the second quarter. therefore, we feel that the worst episode of the crisis is now behind us, which should in turn support turkey ’ s economic prospects. however, it remains to be seen whether recent improvements in leading indicators will translate into a long lasting and durable recovery, since part of the rebound reflects the impact of the fiscal stimulus packages. the situation is similar across the globe : recovery has started in the global economy, yet the extraordinary policy measures taken since the last quarter of 2008 makes it harder to interpret the underlying trends. given the elevated levels of unemployment and ongoing de - leveraging process, the recovery is likely to be gradual. distinguished guests, let me close my speech by turning to the main theme of this session. overall, i am encouraged to recognize initial signs of recovery but also i am anxious that the green shoots that have sprouted may still expose to a spring frost. “ green shoots ” may not be vigorous enough and important downside risks still remain. however, unlike a couple of quarters ago, we should also acknowledge that we can now at least talk about upside risks – that is, “ blossoming shoots ”. thank you.

. the developments since november 2008 in domestic financial markets and falling inflation have confirmed the accuracy of our projections and the policy rate - cut decisions, increasing the confidence in monetary policy. as a consequence of the measures taken and the limited recovery in risk perceptions, the level of market interest rates today is below the pre - global crisis level in both nominal and real terms. having neutral interest rates at lower levels during economic recessions is an expected development in well - functioning economies, but it has never been experienced in turkey before. this development should be perceived as an indicator of the normalization of the turkish economy. despite the marked deterioration in economic activity in turkey, there were at least three factors that prevented an outright depression. these factors were the soundness of the financial system, low levels of turkish household indebtedness, and an assertive monetary policy stance, which aimed at mitigating the impact of the crisis on the domestic economy. reviewing these factors, albeit briefly, would allow a better understanding of turkey ’ s economic prospects. the turkish financial system proved to be resilient to the financial crisis relative to many other emerging economies. unlike some of its peers, the turkish banking system did not require any rescue packages or other forms of government support throughout the crisis. the robustness of the turkish financial system was to a large extent a consequence of the financial reforms implemented in the aftermath of the 2001 financial crisis we experienced in turkey. therefore, in contrast to many other countries that have recently revised or put into practice restructuring, supervisory, and regulatory frameworks, many of these were already established in turkey several years ago. furthermore, leading into the recent crisis, the turkish financial system was well capitalized – with capital adequacy ratios exceeding 18 percent – and had relatively low loan - to - deposit and leverage ratios, as well as low levels of foreign exchange rate exposure. relative strength of the financial sector enabled the implementation of rapid and front loaded rate cuts. no bail out scheme or other forms of public support needed during this period. this has provided room for expansionary fiscal policies. in addition to the sound structure of the financial system, low levels of household indebtedness relative to other emerging economies also contributed to the resilience of the turkish economy during the crisis. monetary tightening implemented by the central bank between 2006 and 2008 played a critical role in curbing the lending growth and checking the rise in household debt. prudent and preemptive measures taken by the banking regulatory and supervision