Message from the Chairman of the Board

​​During 2019, trade disagreements between US and China, Brexit, and other geopolitical events became focal points of the global agenda. The Fed cut interest rates three times in 2019 and signaled a “wait-and-see” stance at its last meeting. As the European Central Bank cut its policy rate once, the idea that the countries in the region should support growth via fiscal policies strengthened.

After the domestic economy decelerated in the first half of the year, recovery became more pronounced especially in the second half with a decline in inflation and interest rates. ​​

​​After the contraction from June 2018 to July 2019, imports started to pick up due to both the recovery in economic activity and the previous year’s low base. We expect this trend to continue in 2020 with the acceleration in economic activity. 2019 ended with a positive current account balance. In 2020, we anticipate that the current account balance will post a deficit, but it will likely be more limited compared to previous years.

​​Inflation declined rapidly in 2019, and completed the year at 11.84%. We expect inflation to continue its decline in 2020. As a result of the accommodative global monetary policies, the downward trend in domestic inflation and the relatively stable course of exchange rates, the CBRT cut its policy rate by 1325 basis points to 10.75% in the July 2019-February 2020 period.

Budget balance in 2019 posted a deficit close to the TL 125 billion foreseen in the New Economic Program. Tax revenues showed a limited increase by 8.3% year-on-year while central budget revenues increased by 16% year-on-year due to the high increase in non-tax revenues. In the same period, budget expenditures increased by 20% annually.​​

​​Banking sector loans have started to accelerate as of the second half of the year. NPL ratio in the sector is at 5.3% as of December. While the net profit in the sector decreased by 8% annually in 2019, we expect that profitability will increase in the coming period. The capital adequacy ratio is strong with 18.4%.

​​We will continue to follow the developments on global trade, Brexit and geopolitical uncertainties in 2020, as well. In addition, the presidential elections to be held in the United States in November 2020 will be another important focal point in investors’ agenda.