Page 8 - faaliyet-raporu-en-2017

MESSAGE FROM THE CHAIRMAN OF BOARD

Our Esteemed Shareholders, Business Partners and Associates,

The measures taken to invigorate the economy in 2017 served, on the one hand, to increase expenditures, while
also reducing tax revenues, and this resulted in an increase in the budget deficit. This situation, which has continued
into the middle of this year, has led to the period closing with an unexpected rapid growth in the economy in the
second half of the year, and a budget deficit that exceeds significantly the targeted figure, even though it showed
a positive development. Unfortunately, it does not seem likely that the rapid 7,4 percent growth in the economy
attained last year will continue this year. Should the majority of funds in the market being withdrawn by the public,
less resources will be left for the private sector, and higher interest payments will emerge as a natural result. It is
highly probable that this development will reduce investments and thus cause growth to slow down. According to
data announced by the Ministry of Customs and Trade, the regression in foreign trade encountered in recent years
has finally come to an end, and 2017 was a year of recovery, although it can be said that the beginning of an
increase in the foreign trade deficit and its reflection on the current deficit is not a good sign.

We see that the 2017 inflation target has been exceeded for the first time since 2002, with a high deviation.
Consumer inflation, which has followed a rather fluctuating course, started to rise in August and climbed to 13
percent with the hike in exchange rates seen between September and November. As a result of the decline
experienced in December upon the reversal of the base effect, 2017 concluded with inflation having reached 11,92
percent, which is more than double the targeted figure.

We do not think it will be easy to achieve the 5 percent target for 2018, and the fact that the Central Bank has
speculated a higher rate of 1,32 points in the first month of the year indicates that the medium-term inflation
outlook will continue its course in double digits.

Given the state of the global economy, it would seem that the central banks of the developed countries, mainly the
FED, as the central bank of the United States, are slowly tightening their monetary policy, and this means that
global interest rates will rise again in the upcoming period. This situation, which adversely affects the flow of
capital into developing countries, constitutes a risk factor for Turkey. When we look at the international markets,
commodity prices, especially those of oil and natural gas, are on the rise, and this again pulls the inflation pointer
upwards.

While the United States and the EU appear to be losing ground in the balance of world powers, countries such as
China, India, Korea, and Malaysia seem to be keen to fill the global leadership gap in many areas, especially in
investment and trade. It is likely that tensions between China and the United States will continue through 2018,
which will affect the global economy in a negative way.

The downsizing in international contracting market in recent years has been a result of the economic uncertainty
that has surrounded the global liquidity recession and geopolitical problems. At this conjuncture, after seeing a
total decline of 14 percent in 2014 and 2016, the performance of Turkish contracting companies abroad in 2017 has
improved positively, in terms of both figures and market share, and we hope that this momentum will continue in
the coming period. The fact that Turkey can still attract financing and investment from abroad, albeit with high
costs, is a good indicator.

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