Dear Stakeholders,
Recovery efforts for global economy are progressing slowly.
In 2023, the world economy was confronted with significant monetary tightening and worldwide ongoing political uncertainties. Despite the regional conflicts and crises resulting from climate change that came on top of the said conjuncture, the world economy displayed a performance that surpassed anticipations in terms of resilience, and carried on with attempts to recover.
Although global recovery is hampered by shrank liquidity and increased interest rates that resulted from tightening monetary policies maintained across the globe for combating inflation, growth rates are expected to exceed the projections. Based on IMF’s January 2024 update to the World Economic Outlook, global growth estimation for 2023 was increased to 3.1%, anticipating growth rates of 1.6% for developed economies and 4.1% for developing economies. Global growth for 2024, on the other hand, is projected as 3.1%.
During 2023 when the Turkish economy sustained its growth trend, it was observed that inflationary pressure upped its intensity throughout the year and CPI stood at 64.77% at the end of the reporting period. Consumption, which was brought forward parallel to the surging inflation, has been the driver of the national economy that registered 4.7% growth in the first three quarters of the year. During the rest of the year, we are anticipating domestic consumption to back growth, and the national economy to end the year with positive growth, despite signals of stagnation in global economy. The Medium Term Plan announced in September estimated 2023 growth at 4.4%.
Upon appointment of the new economy administration, more orthodox monetary and fiscal policies were put in place in the second half of the year. Having initiated the simplification process for increased functionality of market mechanisms and stronger macro-financial stability, the CBRT turned towards gradual hikes of the policy rate, which was hiked from 8.5% in June to 42.5% at the end of the year.
While the pandemic-originated destruction in the economies of all countries has yet to be eliminated fully, exchange rate movements that particularly affected developing countries came on the scene with the effect of the regional wars during the course of the year, along with high inflation rates that reappeared after many years of absence in developed economies. The high interest rate environment and the issues in accessing financing are expected to persist through 2024. On another front, geopolitical risks are escalated to a whole new dimension with the continuance of trade wars especially between the US and China, as well as physical wars.
These unforeseeable developments in recent years demonstrate that the period ahead dominated by challenging circumstances can be handled only by way of rational policies.
The real estate sector is undergoing a relatively sluggish period.
The negative developments in the world and in Turkey are reflected in the real estate markets in our country as well.
From the standpoint of our sector, the housing sector went through one of the most sluggish periods of late. Despite increased need for loans in 2023 that has been the scene to slumped purchasing power, the cautious lending policies of financial institutions followed by increased interest rates made it harder to access housing loans, which decreased the demand therefor, and in turn, led to declined mortgage sales as well. The downturn in sales, coupled with the additional burdens stemming from higher costs, gives rise to loss of appetite for new project development, which reflect negatively on growth figures. Gradual recovery is ongoing, on the other hand, in the office and retail market. As the post-pandemic return-to-office and transitioning to hybrid working format cause a stir, occupancy rates and TL-based rental income go up in the sector, where new office supply is limited. Looking at the retail sector, the rental income in shopping malls rises on TL basis, paralleling the upturn in the footfall and turnovers of shopping malls.
Our Company is moving ahead in line with its targets.
During 2023, as İş REIC, we have realized all our projects in line with our targets. As we do each year, we carried on with our activities in the reporting period in keeping with our vision to achieve sustainable growth and to create added value for our shareholders, customers, business partners, employees, and most importantly, our country.
We carried on with our distinctive and contemporary projects that seek to achieve the balance between price and quality, are aligned with all applicable regulations, and focus on sustainability, and we retained our title as one of the most preferred and trusted companies in the sector.
As we author successful results on the back of our solid balance sheet composition and financial performance, maintaining the healthy structure of our portfolio enabled by accurate investments, increasing its quality and productivity will remain as the main pillar of our strategy in the future as well.
We have total confidence in the future of our country and our Company.
After the local elections that will take place in the first half of 2024, there is not a new election on Turkey’s calendar, at least at present, in the next four years. This presents an opportunity that should be taken advantage of to introduce the necessary policies for resolving the fundamental issues of the sector. We will start seeing the implications of the steps that the new economy administration took in the second half of 2023 from the second half of 2024. Thereafter, domestic demand is anticipated to revive with the gradual decline of inflation, and the real estate sector is expected to be positively affected by this moderate atmosphere.
In the coming period, as İş REIC, we will continue to fulfill our responsibility for developing projects that are accessible, sustainable, earthquake-resistant and employ new technologies in all segments of the sector, notably in housing investments where the need is more intense.
On behalf of our Board of Directors, I would like to thank all our stakeholders who walk by our side as we march towards a sustainable future.
Sincerely,
Can Yücel
Chairman
