PASHA_BANK_ANNUAL REPORT 2023

Among Asian economies, the Chinese economy continues its recovery process post-Covid-19. The Chinese economy achieved a growth of 5.4% in the first half of 2023. However, despite avoiding expansionary measures in economic policy, there is a slowdown in domestic demand, especially in the real estate sector, coupled with a decline in export items, particularly in the European economy. As a result, economic growth remains below the pre-Covid-19 period. China’s real estate sector is one of the most influential industries for its economy, accounting for approximately 25% of the total economic output. The problem of debt repayment faced by major real estate companies is being tackled by the government’s steps to increase housing demand. However, the growth in the real estate sector has not yet fully recovered, creating pressure on other sectors and the global economy through financial institutions. Leading indicators of growth, such as China’s Manufacturing PMI data, suggest hints that economic growth could further decelerate. The Manufacturing PMI data monitored throughout the year indicates signs of economic downturn. In February 2022, the price of one ounce of gold tested levels of USD 1,600 and by the end of December 2023, it reached USD 2,077. The ongoing conflict between Russia and Ukraine has led investors to turn to gold, which they perceive as a safe haven. Gold prices experienced a decline in March 2023 following the Federal Reserve’s interest rate hike, reaching a level of USD 1,820 in May 2023. The expectation that central banks, particularly the Fed, would initiate interest rate cuts in mid-2024, along with gold not falling below the technical level of USD 1,600, has prompted a rise in the price of gold. While the possibility of central banks implementing a policy of interest rate cuts is viewed positively for the increase in the price of gold, the economic slowdown in China, one of the world’s largest physical gold- demanding countries, is reducing demand for gold and jewelry. Considering that this situation creates a pressure factor on gold prices, a recovery in the Chinese economy is expected to have a positive impact on gold prices. After the Presidential election in 2023, the new economic management and Central Bank Governor, who took office for the Turkish economy, implemented changes in monetary and fiscal policies. The method of credit expansion, expected to support the supply side of the economy, resulted in excessively stimulative effects on domestic demand, leading to the emergence of high inflation issues and prompting a preference for a new model. In the context of the fight against inflation, the Central Bank of the Republic of Türkiye (CBRT) gradually increased the policy interest rate to 42.50%. In addition to raising the policy interest rate, CBRT also increased reserve requirement ratios and began implementing quantitative tightening. Simultaneously, through selective credit THE ONGOING CONFLICT BETWEEN RUSSIA AND UKRAINE HAS LED INVESTORS TO TURN TO GOLD , WHICH THEY PERCEIVE AS A SAFE HAVEN. Rise in gold prices 23 PASHA Bank 2023 Annual Report General Information Information on Management and Corporate Governance Principles Financial Information and Risk Management Review