Bad loans rise but it’s ’all in the head’

Hurriyet Daily News with wires

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Another sign that the economy might be contracting came from the banking sector, as an increasing number of consumers become unable to repay credit debts. Still, the Prime Minister insisted that the problems Turkey was facing were of a "psychological" nature.

According to Banking Regulation and Supervision Agency, or BDDK, non-performing loans of Turkish banks rose 7.2 percent to YTL 3.92 billion in October, as consumers struggled to meet debt repayments. In September, the rise in non-performing loans increased YTL 36 million, but in October, the figure stood at YTL 262 million, business daily Referans reported yesterday. The worrisome increase displays the recessionary trend clearly.

Turkey’s gross domestic product increased only 0.5 percent in the third quarter and is widely expected to contract in the fourth. Many analysts say the contraction will continue into 2009.

In December 2007, non-performing loans and credit card debts stood at YTL 2.82 billion. In 11 months, the figure rose 39 percent, up to YTL 3.92 billion.

Non-performing credit card debts stood at YTL 1.83 billion in December 2007, but the figure in October this year is YTL 2.21 billion, according to the banking watchdog. The data revealed a 21 percent rise in this particular area.

The rise over the same period in non-performing consumer credit loans were YTL 988 million and YTL 1.7 billion respectively, indicating a 73 percent rise.

Surge in October
Figures revealed that non-performing loans did not record a notable increase between August and September, but surged suddenly in October. The figures stand at YTL 3.62 billion for August and YTL 3.66 billion for September.

Figures also revealed a falling interest in vehicle loans. In September, consumers used YTL 5.82 billion in vehicle loans from banks, but the figure was down to YTL 5.69 billion in October. Personal general purpose loans also were down to YTL 33.972 billion in October, from YTL 34.11 billion in September.

But overall, consumers used more bank credits and resorted more to credit cards. The volume of card transactions stood at over YTL 33 billion in October, up from YTL 32.94 billion in September. All consumer loans in October totaled YTL 80.8 billion, up from YTL 80.687 million in September.

Meanwhile, Prime Minister Recep Tayyip Erdoğan claimed the "issue" in Turkey was psychological. Speaking in Ankara yesterday, Erdoğan said there were "those who wish to fan the flames of this crisis, on purpose."

"First we have to reject this and destroy this psychological climate all together," he said. "Do we have the means? Yes. Do we have the faith? Yes. But we also have a finance [sector] that is closing its doors to the real economy." The link between finance and the real economy should not be severed, Erdoğan said, adding that the real economy had been "keeping finance up in its feet until today."