PASHA_BANK_ANNUAL REPORT 2022

24 PASHA Bank 2022 Annual Report European Central Bank (ECB), at 4 meetings held during the second half of 2022, increased policy interest by 250 base points in total from 0% to 2.5%. ECB, realizing the first interest increase since 2011, raised the interest rates to the highest level since 2008 at the current conjuncture where recession concerns were strong. ECB, like Fed, is also expected to continue interest increases in the following period to achieve 2% inflation target. Inflation in Euro Zone followed a high course in 2022, as in 2021, due to increased energy costs and supply change problems. In October consumer price index reached a historical record of 10.6%. In November, annual consumer price index decreased to 10.0% and declined for the first time since July 2021. Euro Zone economy recorded a growth rate of 5.50% in the first quarter and 4.20% in the second quarter of 2022 which were beyond market expectations. In the third quarter, the growth rate decreased to 2.30% which demonstrated the evidence of loss of acceleration of economic activity in the region. At its December 2021 meeting, increasing the policy interest to 0.25%, Bank of England (BoE) was the first large central bank around the world to increase interests. In 2022, BoE made 9 consecutive increases for a total of 325 base points and raised the policy interest to 3.50%, its highest level of the last 14 years. Inflation in the country was at the peak of the last 41 years at 11.1% in October and it is expected that BoE will continue to increase interests in 2023 to achieve its target of 2%. Central Bank of Turkey (CBRT) kept the policy interest at 14% in the first two quarters. At its monetary policy meeting in august, CBRT evaluated the acceleration of industrial production and increasing trend in employment and decided that the financial conditions need to support these trends and took the decision to decrease interests. Lowered the policy rate to 9% as a result of decreases by 100 basis points each in August and September, and by 150 basis points in October and November, CBRT announced that after a total of 500 base point reduction, decision was taken to cease the cycle of interest decreases. In August, CBRT also took steps to increase the effectiveness of credits against required reserves. Within the framework of these steps, it was decided that required reserves which was being implemented at a level of 20% was replaced by establishing 30% of securities for the banks; TL commercial credits which are not subject to establishing securities will be extended against spending. Additionally, as of 20 August 2022, for commercial credits which would be extended until year end, securities established would have been 20% of credit amount which have been extended with interest rates over 1.4 times of the annual compound reference rate and 90% of credit amount which have been extended with interest rates over 1.8 times of the annual compound reference rate. Increasing inflation trend around the world was also experienced in our country due to increased energy prices and supply problems. Annual consumer price index continued its increasing trend in 2022 which started in 2021 and reached 85.51%, the highest level since September 1998. With the increase in energy prices, annual domestic Overview of 2022 and Expectations for 2023 In 2022, energy and commodity prices which increased by the effect of war between Russia and Ukraine caused a global increase in inflation. global inflation