, and inflation will recede to levels consistent with the target in mid - 2015. now, i would like to give a brief account of developments in economic activity and the shortterm outlook on which the inflation forecasts are based. according to the gdp data of the third quarter of 2014, economic activity was relatively weaker compared to the outlook presented in the october inflation report. in the third quarter, the gdp rose by 1. 7 percent on an annual basis, while growth remained limited compared to the previous quarter with 0. 4 percent ( chart 13 ). analysis of national income components on the production side indicates that the contraction in agricultural value - added led by adverse weather conditions is an important factor in the low growth of the national income ( chart 14 ). data on the expenditures side reveal that in the third quarter, final domestic demand compensated for the fall in the first half and stood slightly above its level in the last quarter of 2013 ( chart 13 ). following an interval of two quarters, private consumption expenditures recorded a robust recovery. in addition, the languishing trend in private investments, which lasted for a long time, reversed due to the increase in machinery and equipment investments. these two factors supported quarterly growth. however, the relatively weak course of exports limited the growth in this period. we expect industrial production, which fell below its previous - quarter average during october - november 2014, to decrease on a quarterly basis in the fourth quarter in line with the decline in december ’ s pmi and bts survey indicators. yet, data for the fourth quarter of 2014 point to a quarter - on - quarter pickup in consumer demand, a moderate course in machinery - equipment investments and some recovery in construction investments. hence, we believe that domestic demand will remain on a modest upward track in the final quarter. external demand, on the other hand, remains weak due to europe ’ s slowing economy and bis central bankers ’ speeches geopolitical tensions in neighboring countries. the weak external demand puts pressure on export growth, but the fact that export growth exceeds import growth supports the rebalancing of the economy ( chart 15 ). moreover, falling oil prices contribute positively to the current account balance by reducing import expenditures ( chart 16 ). we expect domestic demand to recover moderately and external demand to remain weak in 2015. depending on weather and precipitation conditions, the projected correction in the agricultural value - added will be a factor to support growth. however, there are external demand - driven downside risks to growth.

of large liquid, deep and international markets. it is a precondition and a tool for ensuring the smooth functioning of these markets. securitisation, as we know it today, and which underpins national and international financial activity, would be impossible without these ratings. a further step was made with the expansion of structured products. the role of rating agencies now extends well beyond that of mere information providers. the rating process is an integral part of the design and financial engineering of these products : it determines the size of the tranches and the seniority levels. the rating of a structured product is not an average of the ratings of the underlying assets, in particular for cdos. it depends on both the correlation between the yield on the various securities and the leverage effect embedded in the structure. rating agencies supply the methods and models for assessing risks and their correlation. they impose the ( liquidity, credit enhancement ) conditions that the securitisation vehicles have to meet in order to be able to issue. from mere intermediaries, they have become quasi securitisation regulators. as a result of their new role and functions, they are now being held responsible for the excesses, malfunctionings and turbulences that have been prevalent on structured product markets for the past three months. rating activity and current turbulences the question is not to assign responsibilities, and even less to enter into a blame game. the rating of structured products has nevertheless led to a deep misunderstanding between investors and agencies. there are two reasons for this misunderstanding. the first – the most often referred to – is the confusion surrounding the actual scope of the rating. rating agencies consider themselves responsible for solely assessing credit risk, while many fund managers, in particular of short - term investment funds, may have expected that ratings would cover all the risks ( notably liquidity risk ) that weigh on their investments. naturally, one may consider that these managers were – or should have been – informed of the exact nature of the rating process. however, one cannot deny that their expectations are natural : the smooth functioning and fluidity of the market are based on the provision to all economic agents of simple, clear and concise information on all the parameters that affect the risk - return ratio. this is particularly the case for aaa - rated investors. contrary to investors in the riskier tranches, which are theoretically more sophisticated, they have less incentive, given the low return on the products, to thoroughly analyse the nature and sensitivity of the