VKF_FRAE_2017

39 VakıfBank Annual Report 2017 The foreign trade deficit, excluding energy and gold, reached USD 37.3 billion. »» INFLATION CLOSED 2017 AT 11.92%. The inflation, which had closed 2016 at 8,53%, reached 11.92% in 2017. This figure is the highest year-end inflation in the series starting in 2003. The rise in domestic demand resulting from the resurgence of economic activity in 2017, the rise in the exchange rate, and the increase in commodity prices especially oil, created an overall upward trend in inflation. Core inflation and the Domestic Producer Price Index also headed up in 2017, reaching historical highs during the year. In 2018, inflation is expected to fare more favorably than was the case in 2017. Due to the base effect from 2017 and the anti-inflationary measures taken in 2017, inflation is expected to fall in 2018 and close the year at 8.90%. »» FOREIGN TRADE DEFICIT ROSE TO USD 76.7 BILLION IN 2017. In December 2017, foreign trade deficit increased by 63.5% year-over-year to reach USD 9.2 billion. The foreign trade deficit, which was USD 56.1 billion in 2016, increased by 36.8% to the order of USD 76.7 billion in 2017 due to soaring imports. The sharp rise in imports was a key factor driving up the foreign trade deficit in 2017, despite the recovery in exports. The increase in imports, in turn, was caused by the resurgence in economic activity, rise in energy spending, as well as increases in imports of intermediate goods and gold. The foreign trade deficit excluding energy and gold remained stable at USD 37.3 billion for 12 months. Economic activity has recovered since the previous year as can be seen in the rise of energy prices, and the increase in intermediate goods imports since November, which play a crucial role in economic growth. The Credit Guarantee Fund-backed loans reinvigorated economic activity on the domestic front, while the recovery in EU countries had a positive effect on our foreign trade. On the other hand, the rise in oil prices compared to the previous year suggest that the energy-related pressure on the foreign trade deficit will continue in the remaining part of the year. Although it is expected that the recovery in economic activity will continue, the recent rise in the foreign exchange rate may put a limit on the climbing foreign trade deficit. In 2018, the foreign trade deficit is expected to increase due to vibrant economic activity and oil prices and reach USD 78 billion. INFLATION DEVELOPMENT (%) Source: CBRT, TSI 3 4 5 6 7 8 9 10 11 12 13 2017 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 7.72 9.65 8.39 10.06 6.53 6.40 10.5 6.16 7.40 8.17 8.81 8.53 11.92 CBRT Expectation CPI (Y-Y. %)