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Rise in Turkey's credit volume to slow, S&P analyst says

February 19, 2014

Credit volume of Turkish banks to increase 15-18%, economy to grow 2.4%, CAR to GDP at 2.9% in 2014. ISTANBUL Turkish banks' credit volume is expected to slow to 15-18 percent for 2014, Standard&Poor's (S&P) says. In an interview with the Anadolu Agency, S&P analyst Goksenin Karagoz said they expected the credit volume in Turkey's banking sector to grow 15-18 percent in 2014, a considerable slowdown from the 31.1 percent rise recorded a year earlier. Karagoz says that the most important factors limiting the growth of the credit volume are the recent measures taken by Turkey's banking regulatory authority, BDDK, and an interest rate hike announced by the Central Bank (CB). Recently the BDDK limited the number of credit cards a consumer can hold, consumer credits and vehicle loans to decrease the household debt ratio and current account deficit related to domestic consumption. On January 28, the CB more than doubled its borrowing rate from 3.5 percent to 8 percent, and raised the lending rate from 7.75 percent to 12 percent. "These are developments that limit domestic demand according to our expectations. Also, the banks that we rated confirm that there will be growth in the 15-18 percent range." "The impact of this slowdown on the current account deficit will be positive," Karagoz said while explaining its effect on Turkey's economic growth. Karagoz predicted that Turkey's economy would grow 2.4 percent and the ratio of the current account deficit (CAR) to the gross domestic product (GDP) would be at 2.9 percent in 2014. He also stressed that the CB's interest rate hike will be felt in the interest margins, especially in first and second quarter of 2014. "Since the banks will re-price the credits during this period, interest rate margins will show a recovery in the second half of the year. Naturally, an increase will negatively affect both demand for credits and bank assets."

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Source: Anadolu Agency (Turkey)

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