PASHA BANK ANNUAL REPOT 2024

2024 OVERVIEW AND EXPECTATIONS FOR 2025 Turkish Economy In 2024, the Turkish economy presented a complex picture across key macroeconomic indicators, including growth, inflation, budget balance, and unemployment. Influenced by both domestic dynamics and global economic conditions, the economy exhibited both positive and negative trends throughout the year. In parallel with global economic growth in Türkiye also slowed down during 2024. While a strong growth rate of 5.7% was recorded in the first quarter, this decreased to 2.5% in the second quarter and 2.1% in the third quarter. Factors such as high interest rates, weakened consumer demand, and stagnation in private sector investments contributed to this slowdown. Although growth is anticipated to recover in the final quarter of 2024, the Medium-Term Program (MTP) projects the overall growth rate to remain at 3.5%. According to the MTP report, growth forecasts for 2025 and 2026 stand at 4.0% and 4.5%, respectively. Net exports made a positive contribution to growth, supported by a decline in energy imports and a recovery in exports. Tourism revenues played a significant role in keeping the current account deficit under control, demonstrating strong performance throughout 2024. Inflation was one of the most prominent issues in 2024. After ending 2023 at 65%, inflation declined to 44.38% as of December 2024, driven by tight monetary policies and relative stability in food and energy prices. The Central Bank of the Republic of Türkiye (CBRT) maintained tight monetary policies throughout the year, keeping interest rates at high levels to control inflation. However, these measures shrank domestic demand and constrained economic growth. In 2025, the CBRT is expected to lower interest rates to stimulate growth. According to the MTP report, inflation forecasts for 2025 and 2026 are 17.5% and 9.7%, respectively, while market players project 2025 inflation within the 25-30% range. The CBRT is anticipated to reduce interest rates to 30% by the end of 2025. In the labor market, the unemployment rate was reported at 8.6% as of March 2024. However, a full recovery could not be achieved due to high interest rates. While the recovery in the agricultural and industrial sectors supported employment, limited growth in the construction sector limited the potential to increase employment in this sector. The MTP report projects unemployment rates of 9.6% for 2025 and 9.2% for 2026. 2024 was also a critical period in terms of budget balance. Post-earthquake reconstruction and infrastructure efforts accounted for a significant portion of public expenditures. Increases in the minimum wage and expansions in social assistance programs created an additional burden on the budget. Despite this, robust tourism revenues and reduced energy imports helped ease some of the budget pressures. The budget deficit is expected to reach 3.5% of GDP. In foreign trade, exports strengthened in line with the recovery in global markets. Particularly, exports to European Union countries increased, while declining energy prices reduced import costs, contributing to a narrowing of the current account deficit. According to the MTP projections, the current account deficit is expected to decline to 1.7% of GDP by the end of 2024. IN 2024, CPI INFLATION WAS REALIZED AT 44.38%. CPI: 44.38% 24 PASHA Bank 2024 Annual Report