macroeconomic outlook and monetary policy in turkey remarks by murat cetinkaya governor central bank of the republic of turkey at j. p. morgan turkey macro and credit conference london 9 february 2017 dear participants, my speech will try to elaborate on the recent macroeconomic outlook, monetary policy framework and the coordinated policy actions to support the fundamentals of the turkish economy. 1. macroeconomic outlook turkish economy was hit by concurrent shocks in recent years. geopolitical tensions, global shocks, security related issues and a failed coup attempt have created significant policy challenges. despite the intensity and size of the shocks in recent years, the growth rate has been quite robust until recently, outpacing emerging market average by a large margin ( figure 1 ). the resilience of growth in recent years can be attributed to factors such as prudent macroprudential policies reducing the sensitivity of economic activity to capital flow volatility, dynamic domestic market, market flexibility of exports, and the fall in energy prices. figure 1. growth rates in turkey and emerging economies ( percentage change, annual ) developing countries excluding china and india turkey * - 2 12. 16 09. 16 06. 16 03. 16 12. 15 09. 15 06. 15 03. 15 12. 14 09. 14 06. 14 03. 14 12. 13 09. 13 06. 13 03. 13 12. 12 09. 12 06. 12 03. 12 - 4 * forecast for 2016 q4. developing countries excluding china and india : brazil, chile, colombia, czechia, hungary, indonesia, malaysia, mexico, morocco, peru, philippines, poland, romania, russia, s africa, thailand, turkey, ukraine. source : bloomberg, cbrt. however, the growth has posted a marked slowdown in the third quarter of 2016, following the failed coup attempt. gdp has contracted year - on - year terms for the first time since the global financial crisis. the weakness in economic activity was driven by a sharp fall in domestic demand and the sizeable drop in tourism revenues ( figure 2 ). figure 2. annual gdp growth and contributions ( percentage points ) net exports final domestic demand other * gdp - 1 - 3 09. 16 06. 16 03. 16 12. 15 09. 15 06. 15 03. 15 12. 14 09. 14 06. 14 03. 14 12. 13 09. 13 06. 13 03. 13 12. 12 09. 12 06. 12 03. 12 12. 11

- central bankers'speeches safe, secure, and efficient payment system, we are pushing for digital payments. this includes the use of innovative digital payment rails, such as instapay, pesonet, and qr ph. building on these payment systems, we have also rolled out bills pay ph, which you can use to pay your bills, palengqr which you can use to pay your market vendors, and egov pay which you can use, if you are a taxpayer here, to pay the government. these programs have helped us surpass our goal of digitalizing at least half of total retail payments. as of end - december 2023, 52 percent of these payments were done digitally. working with the bank for international settlements, we are trying to connect our fast payment system with those of our asean ( association of southeast asian nations ) neighbors as well as india, saudi arabia, and other countries with fast payment systems. this platform is called project nexus. once this is in place in two years, this platform will make cross - border retail transactions more secure, more efficient, and less costly. meanwhile, we are painfully aware that our geography makes us especially vulnerable to climate change. just last week, we witnessed typhoon carina that made this vulnerability all too evident. hence, we have issued guidelines for the management of risks related to environmental, social, and governance issues. at the same time, we have developed a taxonomy for banks for sustainable finance. this will allow banks to tag each of their activities as environmentally or socially sustainable. economic fragmentation let me now turn to you, the consular corps for help. we need your help for one increasingly important concern - that of economic fragmentation. for decades after world war ii, increasing globalization was the norm. most governments believed in its benefits, and thus, most wanted to be part of it. but for almost two decades now, globalization has been losing ground to global fragmentation. in recent years, fragmentation has been fueled by the global financial crisis, trade wars, trade disruptions caused by the russia - ukraine conflict. as we all know, global trade is now on its back foot. according to the world bank, the average annual number of new trade agreements in the 2020s is less than half of that of the 2000s. in contrast, the number of new trade - restricting measures in 2022 and 2023 has tripled relative to 2019. this has led to a slowdown in the growth of trade. it appeared from 2020 to