Page 43 - TURKRptAUG19

The economy is struggling to gain momentum after a recession and there is anxiety that this year could bring a double-dip recession. Rating agencies have expressed worries that President Recep Tayyip Erdogan’s administration will not tolerate the low growth necessary to achieve economic rebalancing. It is seeking to push lending even while non- performing loans ratios are rising and Turkish banks’ profitability falls.
Turkey’s construction industry, meanwhile, has a mighty headache. It is burdened by a large number of unsold homes with consumption in the doldrums. Albayrak, however, said it isn’t posing a “systemic” risk to banks. The government, he reportedly added, has no plans to rescue businesses in the building or real estate industries, but was “closely monitoring them”.
Attempts to clean up Turkey’s bad debt in the wake of last year’s currency crisis have stalled after bankers rejected or put on hold initial plans, according to people familiar with the matter cited by Reuters on July 18. The news agency conducted interviews with more than a dozen bankers, company executives and advisers.
It reported interviewees as relating how there has been little progress over the past three months with plans to help lenders to Turkey’s construction, real estate and energy companies that can no longer afford roughly $20bn of debt. “Everything is just at a standstill,” one banker involved in discussions between lenders, companies and government officials was cited as saying. “The government and everyone is in wait-and-see mode before they take any further action, and people are looking to next year.”
Reportedly, a key obstacle has been a lack of appetite shown by debt- laden companies and their lenders to take drastic measures to restructure the debt, in part because of hope that the economy will soon rebound and improve business. There has also been scant direction from Ankara, the people were quoted as saying.
The Erdogan administration said in April that off-balance-sheet funds would be established to help restructure energy and real estate loans. No detailed strategy, however, has emerged.
“A model where the state provides funding for restructuring is not on our agenda at the moment,” the Turkish Treasury said in a statement to Reuters.
The ratio of non-performing loans (NPLs) in Turkey’s banking sector moved up to 4.36% by the end of June compared to the 4.18% recorded a month earlier, data released by the BDDK banking watchdog showed on July 30. A year ago, at end-June 2018 and prior to the currency crisis that just over a month later knocked Turkey’s economy for six, the NPL ratio stood at 3.03%. The BDDK has forecast that the ratio could grow to 6% by the end of this year. Other analysts have produced higher estimations.
43 TURKEY Country Report August 2019 www.intellinews.com