Muharrem Karslı
Chairman of the Board of Directors

In 2013, the monetary policies pursued by developed countries’ central Banks continued to have a decisive impact on global financial markets, as in previous years. The US economy has progressed to a stronger position, while despite some glimmers of hope from the Euro-zone, economic activity in the continent remains weak. High unemployment rates, as well as difficulties in the loan transfer mechanism are the main challenges facing the Euro-zone’s economic outlook.

Expansionary monetary policies, which were applied by main central banks in an effort to prevent a deepening of the global economic crisis, are expected to be wound down once economic activity recovers. As a matter of fact, the Fed gave the first signals of this by tapering the size of the bond-buying program.

Even though the liquidity pumped in to the economy is to be reduced slightly, the low-interest rate stance will be maintained for some time yet.

In the medium to long run, we could see interest rate hikes as central banks grapple with the inflationary pressures brought about by the applied expansionary monetary policies. However, provided there are no threats on the inflationary front, keeping interest rates low would be a rational strategy in supporting global economic activity.

As a result of this new change in direction initiated by the US, there was some volatility in global risk appetite since the second quarter of the year, which has been reflected to emerging markets in the form of instability in short-term capital flows.

In the post- crisis period, there was something of a slowdown in the growth momentum in emerging markets, which are the driving force of the global economy. In the global arena, all financial assets have been repriced, emerging markets have seen their currencies depreciate and bond rates have increased. Even though questions still remain over how many years it will take, there will be a gradual shift from the global environment of abundant and cheap liquidity to one of contracting government balance sheets.

The pioneer of banking in Turkey, Ziraat Bank's approach to effective and productive balance sheet management continued to support its sound growth and development in 2013.


Monetary policies being adhered to by developed countries' central banks continued to determine the course of global financial markets in 2013.


Successful and disciplined fiscal management gives our country a significant advantage in coping with external-factor fragilities.


Celebrating the 150^th anniversary of its founding, 2013 was a special year for Ziraat Bank.

In an effort to ensure a smooth landing for the Turkish economy, and to engender a more healthy and balanced structure, a number of measures were applied in Turkey in the previous year, paving the way for a sound performance in 2013 as well. Economic growth gained pace in 2013 and domestic-demand driven growth dynamics were observed, which shaped the economic policies applied by the Central Bank and other authorities responsible for the economy. However, domestic demand driven growth exposed the pressure on the current account deficit and inflation. Besides, mounting uncertainty over global monetary policies from the second half of 2013 precipitated a wave of capital out-flows from emerging markets, including Turkey. The weakness in global economic growth and volatility in risk appetite in the financial markets will remain key risks in the upcoming period.

Towards the end of the year, the depreciation in the TL and hikes in interest rates started to have a small impact on macroeconomic data. In particular, the depreciation of the TL caused inflation to exceed projections. Fluctuations in unprocessed food prices during the year also affected inflation, which ended the year at an annual rate of 7.4%.

During periods of increased fluctuations in short-term capital movements, the balance of payments statistics becomes one of the closely monitored macroeconomic variables. A combination of buoyant economic activity and a hike in import demand worsened the current account deficit in 2013. The current account deficit as a ratio of GDP exceeded the level that was projected in the medium term program. In the coming period, however, the current account deficit is expected to narrow on the back of slowing economic activity, decreasing import demand and a positive contribution of exports thanks to the continued recovery in Euro-zone economies.

Taking into account the vulnerabilities caused by external factors, we can conclude that Turkey stands out with its advantageous position and successful and disciplined fiscal management. The 2014 budget and Medium-Term Program demonstrate that there will be no deviation from the successful fiscal policies that have been applied.

The Central Bank of Turkey has continuously applied monetary policies aimed at limiting fluctuations in the TL, preventing possible speculation in the TL and easing any deterioration in inflationary expectations.

The Turkish banking sector maintains its stable and healthy growth. The annual rate of growth in the combined balance sheet of the sector reached 26%, while the continued growth in loans stands as an indicator of the support extended to the real sector. The sector continues to support the economy through its high-quality assets and liabilities structure and sound equity level.

As the pioneer in the banking sector, Ziraat Bank maintained its healthy development in 2013, thanks to its efficient and effective balance sheet management approach. The year 2013 has been a special one for our Bank, marked by the celebrations of its 150^th anniversary. In view of Ziraat Bank’s value-adding innovation around the principle of “Together, to a Better Future” and the significant progress it has taken towards its transformation, as well as its presence as a pioneering bank for the agricultural sector in its 150^th year of its operation, the Bank will sustain its vision of “being everybody’s bank”. Our Bank, which has maintained a devotion to social responsibility for 150 years and which adds value to the economy, is rapidly becoming brand well-known throughout the world.

Muharrem Karslı
Chairman of the Board of Directors