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MANAGEMENT AND CORPORATE GOVERNANCE PRACTICES
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SUMMARY REPORT OF
THE BOARD OF DIRECTORS
DEAR SHAREHOLDERS,
In the wake of the global financial crisis, developed
economies such as the US, Europe, and Japan followed
expansionary monetary policies to stimulate recovery.
In 2014, central banks in developed countries began to
follow different paths in terms of monetary policy. The
US economy recorded its highest growth since 3Q 2003,
growing by 5% on a quarterly basis in 3Q 2014. Due in
part to this strong growth achieved in the US economy
along with the recovery on the employment front and a
moderate rise in inflation, the Fed decided to taper off the
asset purchase program on October 29, 2014, which it had
initiated in September 2012.
Although the 0.2% growth seen in the Eurozone on a
quarterly basis in 3Q 2014, which was slightly above
expectations, was regarded as a positive development for
markets, risks on the growth outlook still persist. The ECB,
which has been grappling continuously with low inflation
and high unemployment, continued to implement its
expansionary monetary policy to revive economic activity
during this period. At its meeting held in September
2014, the ECB cut policy interest rates from 0.15% to
0.05%, and deposit interest rates from -0.10% to -0.20%.
Low inflation rates in the Eurozone caused the ECB to
implement Targeted Longer-Term Refinancing Operations
(TLTRO). In order to provide more funding to banks and
stimulate the economy, the ECB also started asset-backed
security purchases for the first time on December 21,
2014. If the liquidity provided by the ECB falls short, it
stated that government bonds may be included in the
scope of the asset purchase program.
The BoJ also continued to implement expansionary
monetary policies to fight deflation. Having contracted
during this period, the Japanese economy technically fell
into recession after two consecutive quarters of negative
growth, emerging from this setback with 2.2% growth in
4Q 2014. Recording the lowest growth rate on a quarterly
basis since 1Q 2009, the Chinese economy constitutes a
downward risk for global growth.
While recession and unemployment were the primary
problems around the world, the Turkish economy
managed to grow by 4.8% and 2.2% in the first
and second quarters of the year, respectively, on an
annualized basis. In the first nine months of 2014, the
economy grew by 2.8% compared to the same period
of 2013 in real terms. The largest contribution to growth
came from exports. In addition, increasing exports,
declining gold imports and weakening domestic demand
in 2014 led to a substantial improvement in the foreign
trade deficit. The current account deficit also declined
alongside this improvement in foreign trade. As a result,
the current account deficit fell by 29.1% in 2014, to US$
45.8 billion from US$ 65 billion in 2013. The inflation rate
trended higher during 2014 due to food prices as well as
the loss of value in the Turkish lira. Nevertheless, thanks
to these ongoing positive developments, inflation eased
sharply from 9.15% in November to 8.17% in December
2014.