Wednesday, July 27, 2011
ISTANBUL - Hürriyet Daily News
The Turkish Central Bank’s latest efforts to cool down credit growth are in line with the current situation and will have a positive effect, the head of the Turkish Banking Association, or TBB, said Wednesday.
“The Turkish Lira is a stable currency, and we believe this stability will continue,” said Hüseyin Aydın, who is also the general director of Turkey’s state-run Ziraat Bankası.
In an effort to halt the sharp depreciation of the Turkish currency, the Central Bank on Monday brought a halt to current exchange auctions in which the bank was purchasing as much as $30 million from the markets per day. The bank also cut the reserve rate requirements for banks in foreign currency deposits from 11 to 10 percent for one year, while the cuts for up to three-year deposits and over three-year deposits were by 1.5 and 2 percentage points, respectively.
“The Central Bank’s decision in the current phase may be different and extraordinary compared to the past, but we believe that they are in line with the present situation,” Aydın said, adding that the bank had interpreted the changes in the markets and economy accurately.
“The impact of exchange rates and the slowdown in loans will surely have a positive effect on the current account deficit,” Aydın said. The positive progress in macroeconomic indicators such as the budget deficit and debt stock eliminates the vulnerability of the current account deficit, he added.
The bank association did not foresee any inflation risk in the country, Aydın told the Hürriyet Daily News. “Turkey’s macroeconomic figures have a positive course, and we think that fragility will be limited in such a positive economy.”
Be careful with household debt
Aydın, however, warned about growing household debt.
“Individuals have to be more careful in the management of household debt in the long run,” Aydın said, noting the blurry picture of global economic indicators due to risks and ambiguity caused by the United States and Europe. “We all have to be more cautious” until the global economic signs are clearer for the markets, he said.
“The current account deficit has been a long-term structural problem in the country,” Aydın said. “Authorities have been taking the necessary measures on the matter. There is no overheating risk as the credit growth slowdown will cool the economy down in the long run,” Aydın told the Daily News on the sidelines of the meeting.
According to him, the smooth slowdown in credit growth will eventually cause a dampening of domestic demand and the economy as result. The total number of credits granted by Turkish banks has increased by 17 percent, reaching 623,553 this year as of July 1. Consumer credits increased by 19 percent while corporate credits rose by 16 percent in the first half of the year.
“Turkish banks will be much more selective in credits and loans,” Aydın said.