PASHA BANK ENG 20

Overview of 2020 and Expectations for 2021 The Turkish economy, with the economic activity gaining momentum in the second half of 2019, faced a challenging test in 2020, just like all the economies integrated in the global economy did. 14.60 % The CPI inflation rate in 2020 The Bank of England (BoE) made two emergency meetings in March and lowered the policy rate from pre pandemic 0.75% to 0.10%, making a total cut of 65 bps. The BoE continued its bond-purchase program throughout 2020, as do the other leading central banks. The UK economy recorded its fastest shrinkage since 1955, when the data started to be announced, with 2.5% in the first and 19.8% in the second quarter, whereas it grew record high of 15.5% compared to the previous quarter with the base effect. The EU - UK Brexit meetings continue even though no deals have been made yet. It is foreseen that UK will withdraw from the EU without a withdrawal agreement in case the discrepancy among the parties remain. In our country, economic activity gained momentum in the second half of 2019 following the balancing process experienced in 2018-2019 and in March 2020 with the impact of COVID-19 pandemic, the Turkish economy faced a challenging test just like all the economies integrated in the global economy did. Turkey grew 4.4% in the first quarter of the year. In the second quarter, the economy had a rapid shrink of 9.9%, the fastest since first quarter of 2009, due to losses in economic activity as a consequence of the pandemic related cautions taken, restricting social life. As a result of the normalization steps starting in June, the Turkish economy grew more than anticipated at 6.7% in the third quarter. The Central Bank of the Republic of Turkey (CBRT) lowered the policy rate, one week repo rate, from 12.00% to 8.25% for a total of 375 bps at the meetings held from January to May. The CBRT took measures for the flow of credit to the real sector and increased asset purchases. Banking Regulation and Supervision Agency (BRSA) made regulations on the banks’ asset ratio calculation starting the beginning of May. The continuity of production, export and employment was backed up by the Economic Stability Shield package announced in March. Regardless of the expansionary monetary policies implemented by the leading central banks, the TL depreciated in March alongside the other emerging country currencies. The depreciation of TL started creating pressure on inflation. BRSA effected various regulations within the scope of normalization while the CBRT increased the policy rate 200 bps from 8.25% to 10.25% at the September meeting. In December, the CPI hiked monthly 1.25% and the annual CPI inflation hiked to 14.60%, being at the highest level since August, 2019. 20 Annual Report 2020 PASHA Bank General Information