We need external financing…

Last night, Turkish President personally confirmed that the weekend curfew might become a temporarily recurring thing in Turkey, which is actually good news; because it may at least push people to take precautions accordingly and hopefully prevent any future inconvenience we had to experience last Friday.

One thing was quite noteworthy to me during this coronavirus period where we are trying to keep the economy alive by increasing the loan volume: Naturally, public banks are leading the way in credit expansion rate, while foreign banks and banks with Turkish capital are neck and neck. This situation needs further inquiring to find out whether it is associated with capital adequacy or banking style. Maybe it’s got something to do with both. Sadly, banks with Turkish capital are falling behind the foreign banks since the FX rates attack in 2018.

As for the economic activity; the following situation can be observed when looked at the launched/closed company statistics: the number of companies that have been closed on yearly basis after the 2008-2009 crisis up until 2012 seems to be higher than the number of newly launched companies, and it looks like more companies were being launched on a year-on-year basis until the failed coup attempt of July 2016, which means economic activity between the years of 2012 and 2016 was meeting acceptable standards. However, there has been a significant decline in total number of new companies since 2013.

More funds lead to more support…”

The closed/launched company ratio was neck to neck for about a year after the nefarious attack in July 2016. But, the number of new companies didn’t surpass the number of closed companies not until the end of 2017. The economic activity in Turkey did survive despite the FX crisis the following year. The tremendous support by the Government and Public Banks can’t obviously be denied, however, as of the beginning of 2019, the total number of closed companies exceeded that of newly launched ones. Apparently, the trend will remain the same this year too. That is the reason why the government must make every effort it possibly can to help these companies survive as their survival would help unemployment improve as well.

The financial support package released by Turkish government is equal to 2% or 3% of Turkey’s GDP while in other countries such packages comprise more than 15% of their GDP. In my previous articles, I have mentioned that the CBRT was making efforts to improve economic activity by increasing the money supply.

I think an amount of external financing at least around 20 billion USD would help ameliorate the circumstances we are in.