turkey’s enemy of interest rates targets banks to boost growth
Sunday 13 July 2025
Last Updated : GMT 09:40:38
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Turkey’s enemy of interest rates targets banks to boost growth

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Themuslimchronicle, themuslimchronicleTurkey’s enemy of interest rates targets banks to boost growth

We will pressure the banks, especially state banks
Ankara - Muslimchronicle

Turkish President Tayyip Erdogan is encouraging businesses to borrow and spend to power the economic growth that has underpinned his long rule. But after years of expanding credit, some Turks are wary.
Ankara hardware store owner Nurgul says she and her husband have never taken out a loan for their joint business and she is suspicious of banks. “I think they want more people in debt,” she said. “I’ve borrowed for my mortgage and that left me with an excessive amount of debt.”
The president, who has purged the civil service of suspected opponents since an attempted coup last year and is expected to run for reelection in 2019, shares her mistrust. He dubs interest rates “means of exploitation” and has declared himself their enemy.
Since winning a narrow victory in a referendum in April to create a powerful new executive presidency, he has had Turkey’s banks in his sights, calling on them to cut interest rates to contribute to the country’s growth.
“We will pressure the banks, especially state banks,” he said last week. “We will pave the way for investors to access credit easily.”
Government stimulus measures include expanding a credit guarantee fund, guaranteeing some of the loans banks write to smaller businesses. It has backed loans worth 210 billion lira (SR22.92 billion) so far.
Bank loans grew by 12 percent in the first seven months of this year, almost double the rate in same period last year, according to regulatory data, a trend some economists say is worrying.
Turkey has had one of the largest private credit expansions of any emerging market over the last decade, said William Jackson of Capital Economics in London.
“Typically when you get credit booms on that scale, they are followed by a rise in non-performing loans and strains in the banking sector,” he said. “It’s hard to say when those might emerge, but I think it’s clearly a big risk.”
Non-performing loans are at 3.1 percent after 3.2 percent last year. Cemil Ertem, chief economy adviser to the president, said he expected the ratio to fall to 2-2.5 percent in time, on the back of stiff selection criteria applied by the credit guarantee fund.
Since becoming prime minister nearly a decade and a half ago, Erdogan has built his reputation on years of stellar growth. His AK Party has embarked on massive infrastructure projects, building roads, hospitals, subways and high-speed rail, and lifting millions out of poverty.
In 2002, Turkey’s per capita GDP averaged $3,660, behind both Libya and Gabon, according to World Bank data. Last year, it was three times that at around $11,000.
Turkey now sits comfortably among the world top 20 economies and government ministers expect expansion of at least 5 percent this year, after a slowing to 3.2 percent last year.
“The economy is a priority after the referendum process,” said Hatice Karahan, an Erdogan adviser.

Source:Arabnews

 

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