recovery is not harmed through rising cost of capital in the global financial markets. we support developing a set of principles around which each country creates its own system based on local conditions. banking levy or financial activity tax is only one of many options available to promote financial stability and to achieve equal burden sharing. regulations on capital, leverage and liquidity and other macro prudential tools may also be used to achieve similar results. dear participants, let me give you some background information on the turkish economy, before delving on the issue of closer cooperation within the region in the aftermath of global crisis. like all other emerging market economies, the turkish economy was tested by the global turmoil and has proven its strength and resilience. average annual growth of almost 7 percent between 2002 and 2007 faltered in 2008 and turned into a contraction in 2009 as the exports and investment flows dried up considerably due to the global crisis. however, all signs now indicate that the economy has rebounded quickly and is headed towards renewed growth and an improving fiscal balance in 2010. the resilience of the turkish financial system, combined with our flexible and effective liquidity management framework shaped by the experiences of past crises, has turned out to be considerable assets in managing the recent crisis. as a result, growth forecasts of international institutions for the turkish economy have been revised upwards repeatedly and reached as much as 7. 2 percent, the highest among oecd countries. the crisis and slowly emerging global architecture in its aftermath present major opportunities that have once again highlighted the importance of economic cooperation and coordination among countries and economies. in the case of the middle east this is perhaps best embodied in the multiple synergies in financial integration and joint investment opportunities between turkey and the arab world. it is a great pleasure to see that the relations within our region have been strengthening on a solid ground. the strong historical, cultural and social ties among our countries constitute a solid basis to further develop multilateral relations. commercial relations between turkey and the middle east have been increasing quite rapidly in the last few years, as well as cooperation and exchange of information and dialogue between public authorities. global crisis made clear that especially our region is one of the high growth bases in the world, which in turn, constitutes a potential to grow tight commercial and financial relations. recently, turkey, jordan, lebanon and syria signed a joint declaration on thursday to launch an initiative to form a free trade zone and a visa - free zone. these nations will also set up a joint cooperation council. significant

durmus yılmaz : overview of the turkish economy in the light of new global realities speech by mr durmus yılmaz, governor of the central bank of the republic of turkey, at the international arab banking summit ( iabs 2010 ), istanbul, 18 june 2010. * * * esteemed governors and distinguished guests, at the outset, i want to express my gratitude to the union of arab banks along with turkish banking association, banking regulation and supervision agency and the world union of arab bankers for their efforts in organizing this summit. as the central bank of turkey, we are honored to be a part of this prestigious event congregating such an esteemed group of participants. in this keynote speech, first i want to discuss the post - crisis episode in a global context. then i will continue with the extent to which the turkish economy has been affected by the downturn in global economy. finally, i will conclude with the opportunities and prospects in our region in the light of the new global realities. dear participants, as we all observe from the latest data, signs of recovery have continued in the first half of 2010, albeit at variable speeds across countries and regions. coordinated efforts of the global community have been so far successful in averting a downward spiral similar to the one experienced during the great depression. although global economy is back on its feet, there are several risks involved in this recovery process and many challenges lie ahead. many countries, especially in advanced economies have spent substantial amount of public funds to boost aggregate demand and to revitalize the financial system. most of these countries have no fiscal resources left to put forward a similar stimulus package, if the world economy experiences another setback. therefore it is of utmost importance to keep the recovery intact, which is already too fragile. debt sustainability and fiscal imbalances stand out as the main challenges for many years to come. as the recent developments in the financial markets revealed, deterioration of sovereign creditworthiness can hamper macroeconomic and financial stability. therefore, ongoing problems especially in some advanced economies, particularly in europe should be resolved in a quick, effective and credible manner. however, we should also keep in mind that supporting global demand is a global responsibility. it is questionable whether emerging market economies would be able to fulfill the gap in global demand, while advanced countries stay on the sideline to clean up their balance sheets. neither their share on global economy nor their economic and financial structure would be adequate to play that role.