Increase rate of bank credits still high

Despite all the warnings of Deputy Prime Minister Ali Babacan and the Central Bank, the speedy increase in bank credits is ongoing. In order to decline the increase rate of credits, the Central Bank wants to decrease the quantity of the sources that the banks would transfer to credits, leading to an increase in their prices. So, during a meeting of the Bank’s Monetary Policy Committee (PPK), it was determined to increase required reserves again.

The economy authorities mainly aim at bringing the economic revival under control and preventing an excessive growth rate, which would upset the balances.

It is expected that the growth rate of 2012 will be 2.5 percent. The figure will become definite after the growth numbers of all periods, including the last quarter of 2012, for which an exact figure will be announced on April 1, are evaluated. It is evident that the growth rate of 2012, which was formerly expected to be 3 percent, will remain at about 2.5 percent.

This figure is significant since it will determine the limits of constraints in economic balances along with the growth rate that is to be achieved in 2013. The economy authorities are concerned about the upset of other balanced data including current account deficit, which may be possible if the growth rate increases more than expected this year. For this reason, they aim at not going beyond a growth rate of 4 percent, which was determined for 2013.

Consequently, the authorities wish that the rate of increase in bank credits will not exceed 15 percent during 2013. Over the last few months, the authorities, including Babacan, have given warnings to prevent the exceeding of this limit; but seemingly, these warnings did not make any contribution to the situation.

According to the banking system analyses, the average increase rate in bank credits of the last 13 weeks, which are free from exchange rate effect, has reached 21 percent, much higher than the upper limit determined by the authorities. Consequently, with a decision taken during a PPK meeting, required reserve ratios were increased once again following the last month.

Balanced growth

Another reason for the struggle to refrain the excessive revival is, in my opinion, the fact that putting on the brakes during next year’s election process will not be very possible.

With the local elections that will be held in March 2014, a long process of elections will start. An increase in expenses is already expected due to the elections toward the end of this year. So, it is predicted that during the last quarter of 2013, the growth rates will gain speed, depending on the increase in domestic demands. Due to this prediction, the economy authorities are trying to provide balanced growth at least for the first half of 2013.

The period of increased expenses, which will probably last long, poses a risk of upsetting the economic balances, and the authorities know that the balances achieved in current account deficit and inflation will not be permanent. In other words, the structural defects in the Turkish economy have not been mended yet. Also, a growth capacity with no problems has not been realized.

For all these reasons, the economic growth in Turkey is required to be balanced.