Page 44 - TURKRptJul19

This chart from @RobinBrooksIIF shows the Turkish banking industry's quarterly credit flow as a percentage of GDP, which has a direct impact on the country's growth performance.
Erdogan pours more lira into wretched economy. Turkey’s Erdogan administration is at it again—pouring more credit into the country’s embattled economy to support consumption and fend off a double-dip recession. Banking watchdog BDDK on June 13 eased credit card payment regulations. It raised the maximum number of instalments on certain purchase categories and cut the minimum of an outstanding credit card balance payable each month to avoid late payment fees to 30% on all card limits, from up to 40%, according to its statement published in the Official Gazette. Previously, the minimum amounts payable monthly were 35% on debt on cards with a Turkish lira (TRY) 15,000-20,000 limit, 40% on cards with a limit of more than TRY20,000 and 30% on cards with a limit of up to TRY15,000. The maximum number of credit card instalments payments was lifted for purchase categories including travel expenses, furniture purchases and tax payments. Turks’ credit card transactions grew by 18% y/y to TRY183bn in Q1, according to the latest data from the Interbank Card Centre (BKM).
Loans showered on SMEs. On June 13, pro-government daily Sabah reported that the overall amount to be showered on small and medium sized enterprises (SMEs) by recently announced Treasury-backed loan packages totalled TRY105bn, including the latest TRY25bn announced on June 12 by banking association TBB. SMEs are a crucial part of Turkey’s economy, given that there are around 3mn of them. The fresh public purse stimuli will again be provided under the Credit Guarantee Fund (KGF). The KGF provided TRY250bn worth of stimuli to Turkey’s SMEs in 2017. Loan volumes under KGF guarantees rose to TRY372.5bn as of end-April from TRY317.3bn as of end-October, according to the latest data available on the KGF’s official website. The KGF had TRY318.3bn of capital at end-2018 while the Union of Chambers and Commodity Exchanges of Turkey (TOBB) and the Small and Medium Enterprises Development and Support Administration (KOSGEB) retained the largest KGF stakes of 29.2% each, according to the fund’s latest activity report. Some 27 local lenders each had a KGF stake of 1.54% with each bank’s participation amounting to TRY4.9bn.
Allow me to ‘encourage’ you. Even if in reality the Turkish government has no money to back up these credit splurges, it does have the political authority to persistently ‘encourage’ local lenders to somehow keep Turkey’s consumption-based, debt-fuelled economy alive—even if came spectacularly off the tracks last summer with a currency crisis that ushered in a painful recession and left swathes of the country’s corporate sector wondering how they were ever going to repay their FX debts with their depreciated lira earnings. When the good old days were purring (and you can argue all you want over how much of it was a ‘debt-fooled’ mirage), Turkey’s banking industry was seen as one of the nation’s strengths, along with the fiscal
44 TURKEY Country Report July 2019 www.intellinews.com