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36 I Southeast Europe bne November 2017
ISTANBUL BLOG:
Storm clouds gather over Turkish economy
Will Conroy in Prague
Economic forecasters see dark clouds gathering over Turkey, and they’re not at all sure they can be dispersed. Analysts are getting the jit- ters. The Istanbul stock exchange, until recently a big draw that registered a series of all-time highs, was – taking the ISE30 index which in euro terms fell 9% m/m in September – the worst perform- ing major emerging market bourse last month. And there are growing signs that the government-backstopped lending boom could end in tears.
William Jackson, senior emerging markets economist for Capital Econom- ics, tells bne IntelliNews: “I agree that
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there’s a problem of over-lending. We’ve warned about the build-up of vulnerabil- ities in the banking sector for some time. The rise in the private sector credit- to-GDP ratio over the past decade has been larger in Turkey than in any other emerging market, except China. Usually, credit expansions on this scale result in a misallocation of resources and problems
further down the line. I think the scale of these problems is not yet appreciated by the markets.”
Gauging what might come next, Jackson also reflects: “The big improvement in the economy has probably now hap- pened. Private sector credit extension has slowed and we suspect that GDP growth
“Usually, credit expansions on this scale result in a misallocation of resources and problems further down the line”