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2.9​ ​COVID-19 hits Istanbul hard as NPLs rise and credit card spending sinks
The economy of Istanbul, Turkey’s largest city and the country’s cultural and commercial capital, has been hit hard by the coronavirus (COVID-19) pandemic, data from the Istanbul Municipality Statistics Office has shown.
Spending with credit cards in the city declined by 17% between December and March, whereas the decline was only 3% across the country during the same period.
But the residents of the megacity of 16mn ramped up borrowing from banks. The loan volume in Istanbul grew nearly 15% on an annual basis in the first quarter of 2020. Non-performing loans (NPL), meanwhile, soared 59% y/y. Consequently, the NPL/total loan ratio jumped to 5.4% at the end of March from 3.8% a year earlier.
Consumer loans increased by nearly 38% y/y, housing loans grew 7.7% and car loans were up by 15% on an annual basis in the first quarter of 2020.
The city’s statistics office also reported that the NPL/total loan ratio in the city’s tourism sector was nearly 16%. The corresponding figures for the construction and maritime industries were 14.6% and 10%, respectively.
2.10​ ​Officials fret as Turks take out loans to buy gold and hard currency
Government officials think Turks are taking out loans from banks to buy gold and hard currency, Hurriyet has reported.
The issue of the misuse of credit was raised at a recent cabinet meeting and at discussions held by the executive committee of the ruling Justice and Development Party (AKP), according to the daily.
Ministers told colleagues and party executives that they were keeping a close eye on the fate of awarded credits and that such wrongful use of loans would not be allowed.
Even before the upheaval caused by the coronavirus (COVID-19) pandemic, Turkey’s state-owned banks were for months cutting borrowing costs to help revive the economy hit by a recession last year. Some private banks followed suit, but were nevertheless criticised by the government for “not doing enough”.
It is of course not unusual for people to seek safe havens in sure bets such as precious metals and strong currencies at a time when economic turbulence and uncertainties are unfolding, and that’s the case no matter what government officials are claiming about economic prospects.
The Turkish economy, which has hardly crawled back from the downturn triggered by the summer 2018 currency crisis. will shrink at least 5% this year if the latest IMF prediction holds true. The coronavirus outbreak hit at a terrible time for Turkey because the economy really wasn’t yet out of the woods.
Data from banking regulator BDDK showed that consumer loans increased to Turkish lira (TRY) 515bn (€61bn) as of April 17 from TRY500bn in early March with “personal loans”, taken out by bank customers to pay off credit card bills or reduce other loan debts, rising 4% over the same period to TRY297bn.
19​ TURKEY Country Report​ June 2020 ​ ​www.intellinews.com