But what is the actual situation? Perhaps, the reality is not as fear-inducing as the picture the S&P has painted, but being cautious is imperative at this level. This is because for the first time in the history of the Turkish banking system, the amount that has turned into bad debt from overdue loans has surpassed 100 billion.
Sharp increase in non-
performing loans
As of the end of 2018, non-performing loans amounted to TL 102 billion 653 million. This figure stood at 68 billion 661 million lira in 2017. This increase of 49.5 percent (TL 33.9 billion) in just one year, reveals how damaging the past year has been for the economy and clearly shows the situation of private sector companies. This increase in the total of non-performing loans is highest since 2009, which was the height of the global economic crisis, when 60.5 percent of total loans were non-performing.
TL 102 billion in non-performing loans amounts to 4.1 percent of the total amount of credits loaned. This percentage was as high as 5.3 percent in 2009 and later it went down to 2.7 percent in the following years.
Construction and trade:
highest underwater loans
The sharpest increases in non-performing loans were seen in housing-based and real estate brokerage, electricity and gas, agriculture, tourism, rubber and plastic, shipbuilding, leather and leather products industries. In terms of the amount of such debt, the highest increase was in the construction and retail/wholesale trade sectors. When one includes figures from real-estate brokerage, the total of non-performing loans in the construction sector stands at 18.8 billion lira. In wholesale and retail trade, this amount is 20.9 billion lira.
Will the dollar reach TL 10,;
will Turkey strike a
deal with IMF?
But then what should we expect to see after the local elections in March, given the portrait described above? There are many rumors suggesting that the rate of the dollar will soar to 10 against the lira, while Turkey has in reality sat down and reached an agreement with the International Monetary Fund (IMF), and the government will announce the fact only after the elections. Do experts agree with such speculation?
Firstly, economist don’t think that any of the dark and pessimistic predictions above will become true, but they also note that we shouldn’t be expecting all roses. Firstly, the credit structuring of the recent period in the real sector is expected to continue at full speed. Experts predict that restructuring demand from real sector companies will amount to another TL 110 billion –the amount of debt so far that has been restructured. However, given their strong capital structure and relatively large profits — albeit having shrunk in comparison with the previous periods — banks will be able to handle this process. The liquidity squeeze will remain in place and the demand for consumption will slightly improve according to experts, who also say that the shrinkage observed in the economy in the past two quarters will be overcome this year. Financial markets will continue swimmingly as they have in the past few months, as long as the US Federal Reserve goes slowly on rate increases and Turkey’s need for foreign currency continues to decrease. However, expert say the real sector and ordinary citizens in the street will be unhappy
