Turkey’s Finance Minister Sees Economy Staging V-Shaped Recovery

Turkey’s Treasury and Finance Minister Berat Albayrak said he expects a V-shaped recovery in the economy as domestic demand improves.

“Leading indicators from June give positive signals for an improvement in the economy,” Albayrak said at a Turkish Banks’ Association meeting in Istanbul. The minister cited an increase in consumer confidence, as well as a jump in the country’s manufacturing Purchasing Managers’ Index.

Turkey’s Finance Minister Sees Economy Staging V-Shaped Recovery

The minister asked lenders to act in line with the government’s development targets and not to prioritize short-term profitability. He advised them to accelerate debt restructurings and to start working on club loans.

The coronavirus crisis has thrust Turkey’s banks into the spotlight, with state-owned lenders in particular playing a key role in stabilizing the nation’s markets and helping the government finance its budget deficit. Authorities have leaned on banks to extend loans to businesses and households to avoid cash injections that could worsen the fiscal outlook.

The nation’s three largest state-owned banks began offering products from mortgages and credit for home appliances to holiday packages at below-inflation interest rates. Over 100,000 consumers took out loans under the state banks’ low-interest mortgage campaign that began earlier this month, with total placements at around 25 billion liras ($3.7 billion), Albayrak said.

“If I had to bet on any emerging market rebounding and posting a V-shaped recovery, I would say Turkey, given the young population and huge desire for credit,” said Timothy Ash, a strategist at BlueBay Asset Management LLP in London, even while describing the minister’s prediction as bold. “That said, the same credit-fueled nature of that recovery is likely the biggest risk to its sustainability.”

Turkey’s economy will probably contract 11.1% in the second quarter, by 6.4% and 2.5% in the third and fourth quarters, and could expand by 4.6% in 2021, according to the latest results of a Bloomberg News survey of 22 economists conducted from June 12 to 17.

Boosting the economy through credit is a policy long favored by President Recep Tayyip Erdogan’s government. Following an attempted coup in 2016, it introduced the Credit Guarantee Fund, through which companies can access borrowing with the government acting as a guarantor.

©2020 Bloomberg L.P.

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