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4.4.3 Retail sector dynamics
Turkish Central Bank reduces maximum interest rates on credit cards. Turkey’s Central Bank announced on June 29 that the monthly maximum contractual interest rate for the credit card borrowings have been capped at 2% for the Turkish Lira and 1.6% for foreign exchange transactions, in a move to boost domestic demand. “The monthly maximum overdue interest rate will be 2.4% for the Turkish Lira and 2% for foreign exchange transactions, to be effective from 1 July 2019,” it said in a statement. The bank advised credit card holders with short-term credit needs to seek a consumer loan rather than borrowing on personal credit cards.
Earlier in the month, the country’s banking sector regulator eased credit card payments in the face of weak consumer demand.
The latest GDP data showed that households’ final spending declined by 4.7% y/y in the first quarter of this year, when the country’s economy shrank 2.6% from a year ago. The decline in households’ spending was a higher 8.9% y/y in the final quarter of 2018. However, there are signs that consumer confidence is improving. The country’s statistics office reported last week that the economic confidence index rose 7.6% m/m to 83.4, still below the 100-level threshold separating optimism from pessimism. In the month, the consumer confidence sub-index jumped 4.3% m/m.
There were more than 66mn credit cards in use in Turkey as of end April, according to data from the Interbank Card Centre (BKM). The value of domestic credit card transactions rose 19% year-on-year to TRY189.5bn (€29bn) in the first quarter, data from BKM show. The default rate on credit cards was 6% as of end-May versus the 3.1% default rate on consumer loans.
Sales of white goods, including refrigerators, washing machines, ovens and dish washers, in Turkey plunged 20% y/y to 554,874 units in May, according to data from business group TURKBESD. In the first five months of the year, 2.39mn units were sold, marking an 11% y/y local market contraction, it added. Can Dincer, head of TURKBESD, stressed the strong correlation between new home sales and purchases of white goods and said: “The decline in first-time home sales adversely affected the white goods market.” According to Dincer, first-time home sales dropped some 30% in April and declined by another 39% in May amid Turkey’s deep economic downturn. “Despite the strong contraction in the country’s housing market, the decline in white goods was somehow limited at 11% thanks to the tax reductions the government granted in the last quarter of 2018,” Dincer said. Dincer also voiced optimism that a recent decision by the country’s banking sector regulator BDDK to ease credit card payment rules may revive demand. The BDDK announced on June 12 that it cut the maximum instalment period to
30 TURKEY Country Report July 2019 www.intellinews.com