A rapid recovery is underway in Turkey

Almost all sectors in Turkey have benefited from the economic recovery in the last six months. However, some are still in the spotlight due to high rate of non-performing loans.
Analisis Credito y Caución
Madrid - 18-ago-2010

After the Turkish economy shrank 4.7% in 2009, it began to recover rapidly, resulting in a growth rate of 11.7% in Q1 of 2010, according to the Turkish Statistics Institute. It is worth noting that 7.5 points of that 11.7% growth figure stemmed from consumption expenditure. Industrial production has increased since December 2009, despite a slight slowdown in April. Similarly, capacity utilisation has been stable, at around 73% in the second quarter of 2010, after its jump from 65% in the first quarter.

Public finances fell in 2009 as a result of lower tax income, subsidies and public expenditure designed to kick start the economy. However, in the first five months of 2010, while public expenditure rose 5%, revenues increased 19% - thanks mainly to tax income on imports and private consumption. Despite those positive signs of a strong recovery - especially the rise in domestic demand - the growing current account deficit is a concern, as is unemployment, which, although decreasing, stood at 13.7% in March.

The banking sector is doing well, with a high capital adequacy ratio of over 18%, healthy profitability and a transparent loan portfolio that does not involve mortgage products. Nevertheless, non-performing loans are still high - at 4.5% in June, despite a 41% decrease in bounced cheques and protested bills in the first five months of the year.

Almost all sectors have benefited from the economic recovery in the last six months. However, some are still in the spotlight due to high rate of non-performing loans: notably textile, paper, publishing, electrical goods, plastics, chemicals and wholesale trade. In the first half of 2010, Crédito y Caución have seen higher payment defaults in the transport, food, electronics, chemicals and consumer durables sectors. Textile, electronics, chemicals and automotive still represent a relatively higher risk as they are export driven, with around 60% of their exports going to EU markets, where demand is currently sluggish.

Good forecast

In fact, the economic problems of some countries in the eurozone - Turkeys biggest export market - is worrying, as is the significant level of Turkeys external borrowing, which could potentially affect the countrys credit rating.

On the plus side, the decrease in unemployment is expected to continue as a result of economic recovery and seasonal factors - especially tourism, construction and agriculture. The recent positive rise in consumer confidence and capacity utilisation indicates that both consumption and investment expenditures will have contributed strongly to the growth rate in the second quarter of 2010. In the third quarter, the slight slowdown in industrial production will be a key factor but, overall, GDP is expected to grow around 5% for the whole of 2010.

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