PASHA_BANK_ANNUAL REPORT 2022

25 PASHA Bank 2022 Annual Report General Information Information on Management and Corporate Governance Principles Financial Information and Risk Management Review production price index was realized as 157.69%, the highest level since 1981. Annual consumer price index decreased to 84.39% in November, which went downward for the first time since May 2021. In addition to base effect, with the impact of easing in global energy prices, annual domestic production price index decreased to 136%. Turkish Statistical Institute (TurkStat) announced 2022 year-end inflation as 64.27% (consumer price index) and 136% (domestic production price index). In the following period, it is anticipated that inflation will continue to decrease based on the base effect and will be realized at the range of 30%-35% at 2023 year-end. Despite strong contribution of services balance, current account deficit continued to increase in 2022 with the decrease in exports and high levels of energy and gold imports. Strong course of exports during the first half of the year lost acceleration in the third quarter due to reduction in foreign demand. As of November 2022, foreign trade deficit increased by 60.7% on an annual base and became USD 8.8 billion. Due to high energy prices, foreign trade deficit reached USD 99.8 billion between January- November. Current deficit maintained its high levels as a result of continuing rapid increase in foreign trade deficit. Current account deficit was USD 41.8 billion during the first 11 months of the year, while 12 month cumulative current deficit reached its highest level since August 2018 at USD 45 billion. It is anticipated that risks related with current account deficit will still be on the agenda in the following period, parallel with the loss of acceleration in economic activities in global scale, primarily in Euro Zone which is Turkey’s main export market. Turkish economy grew annually by 7.74% at the first quarter of 2022 and by 7.52% at the second quarter in line with the private consumption demand activity. At the second quarter, main factors of annual growth were services and industrial sectors as in the first quarter and private consumption kept supporting growth, primarily with the contribution of service items. Turkish economy, which demonstrated a strong growth performance in the first half of the year, but acceleration lost became evident in the third quarter. The economy grew in line with the market expectations at 3.85% in the third quarter. Despite the contribution of private consumption, net export contribution exhibited a downward trend due to reduction of economic activity in export markets and strong imports. Moreover, investment spendings were also limited after a year of expansion and this was another negative factor. Growth is expected to be 5% annually in 2022. It is expected that slowdown of global economic activity and inflationary pressure will continue in 2023 and Turkish economy will grow by 3%-4%. Despite strong contribution of services balance, current account deficit continued to increase in 2022 with the decrease in exports and high levels of energy and gold imports. current account balance