MILLIRE 2021 ANNUAL REPORT

FINANCIAL STATUS 45 MİLLİ RE ANNUAL REPORT 2021 RISKS AND ASSESSMENT OF THE GOVERNING BODY UNCONSOLIDATED FINANCIAL STATEMENTS TOGETHER WITH INDEPENDENT AUDITORS’ REPORT THEREON CONSOLIDATED FINANCIAL STATEMENTS TOGETHER WITH INDEPENDENT AUDITORS’ REPORT THEREON IN 2021, TURKEY CONTINUED TO RANK AMONG THE WORLD’S MOST SUCCESSFUL COUNTRIES WITH RESPECT TO GROWTH. According to the International Monetary Fund (IMF), the world economy expanded by 5.9% in 2021 despite the pandemic. Based on the forecasts in the World Economic Outlook update released in January 2022, developed and emerging economies grew by 5% and 6.5% respectively. The same report projected a growth rate of 4.4% for the global economy in 2022. The Turkish economy was differentiated with its growth performance. In 2021, the Turkish economy continued to rank among the world’s most successful countries with respect to growth. As the recovery in economic activity continued, economic growth was registered as 11% with the contribution of the low base effect. The drivers of rapid growth were private consumption expenditures that increased with economic activity and exports that grew in line with global recuperation. All main sectors contributed positively to GDP growth in the first half of the year, while agricultural and construction industries suffered a noteworthy contraction from the third quarter of the year. As high exchange rates and globally soaring commodity and energy prices added to inflationary pressures through the cost channel, CPI, which was high throughout the year, shot up to its peak in December and marked the last 19 year’s highest level at 36.08%. The CBRT changed its policy. After keeping the policy rate fixed until September which it had increased to 19% in March 2021, the CBRT switched to rate cut as a result of the modification of its monetary policy. The depreciation of the Turkish currency became deeper as the anticipations strengthened that the cumulative 400 bps rate cuts implemented until the end of the year would continue, resulting in higher volatility of the value of the Turkish lira. The CBRT started directly intervening the market by selling due to unhealthy price formations in exchange rates. The depreciation of the Turkish lira gained momentum after the CBRT set its policy rate as 14% with a 100-bps cut in its December meeting. The “FX-indexed TL term deposit” instrument introduced by the end of the year to curb the depreciation of the Turkish currency and to encourage TL savings was received positively by the markets, and the exchange rates took a downturn. Concurrently with these developments, a transition was made in the Turkish Economic Model. The Model basically focuses on stable and sustainable growth driven by exports which is the engine of the country’s economy, and targets to back the economy with value-added production to be able to ultimately exit the current deficit cycle. Source: TURKSTAT, CBRT, Ministry of Treasury and Finance 2019 172 2020 161 2021 225 2019 203 2020 209 2021 271 2019 0.9 2020 1.8 2021 11 GDP GROWTH RATE – BASED ON CURRENT PRICES (%) IMPORTS (USD BILLION) EXPORTS (USD BILLION)