Logbook of the Turkish Economy: Reassuring Flow of Credit to Return to Growth
Dalgin, Burak; Sak, Güven | April 2019
Abstract
Over the past decades, Turkish economic growth was fueled by availability of credit. A potential credit starvation poses a significant risk for the private sector, which has been the main beneficiary of the last decade. In order to avoid a long recovery, which is typical for recessions accompanied by debt overhangs, Turkey needs to have banks resume lending. This doesn't seem possible given the at-limit sources and unattractive profitability of the banking sector. Therefore, troubled assets on bank balance sheets need to be cleared with timely and competent action. Naturally, this could work only if accompanied with a rational, predictable and market-friendly macroeconomic framework and certain regulatory/ judiciary support.
The public-private partnership approach to deal with distressed assets advocated in this paper would (i) support private sector (employment, commercial capacity, value chains around certain firms) while improving its competitiveness (elimination of zombies, creating at scale firms); (ii) enable banking system to resume lending thanks to released capital; (iii) use taxpayer funds effectively through an independent, transparent and performance-oriented vehicle; (iv) mobilize foreign funding resources; and (v) send a strong positive signal to the broader market. Enough experience on distressed asset relief programs has been accumulated by EBRD and IFC in the aftermath of the global crisis.
Citation
Dalgin, Burak; Sak, Güven. 2019. Logbook of the Turkish Economy: Reassuring Flow of Credit to Return to Growth. © Economic Policy Research Foundation of Turkey. http://hdl.handle.net/11540/10016.Keywords
Economic Development
Economic Infrastructure
Economic Policies
Regional Economic Development
Microfinance Programs
Public Finance
Local Financing
Financial Stability
Financial Sector Regulation
Public Financial Management
Financial System
Financial Statistics
Foreign and Domestic Financing
Financial Inclusion
Enterprises
Financial aid
Economies in transition
Local Finance
Local Government
Insurance Companies
Banks
Social Equity
Pension Funds
Mutual Funds
Financial Aspects
Fiscal Policy
Social responsibility of business
Accounting
Personal budgets
Cost and standard of living
Bank accounts
Credit control
Regulatory reform
Banks and banking
Digital Financial Service
Pension plans
Individual retirement accounts
Employee pension trusts
Investment management
Investments
Multiemployer pension plans
Keogh plans
Individual retirement accounts
Pension plans
Employee pension trusts
Pension trusts
Investment companies
International banks and banking
Stock exchanges
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