Turkey's growth data for the first quarter of 2017 presents a very important and distinctive new trend for the Turkish economy.
First of all, it is a very positive sign that this growth data rose with the impact of industry and exports, with the former contributing 1.3 percent and the latter contributing 2.2 percent to growth. The Turkish economy had shrunk by 1.3 percent in the third quarter of 2016. The growth figures of 3.5 and 5 percent in the last two quarters on an annual basis indicate both a rapid recovery and that this growth pace will continue to increase into 2017 and 2018. The impact of the Credit Guarantee Fund (CGF) will also be very evident in the second quarter of 2017. As a matter of fact, the preliminary data for the second quarter shows us that the growth trend is continuing and it is improving employment. Coupled with the effect of CFF, industrial production data and the Purchasing Managers' Index (PMI) for the second quarter reveal that Turkey will continue into the second quarter with a growth of nearly 6 percent.
Another issue to be addressed here is that household consumption expenditures are as high as 5.1 percent and are prevalently increasing. That is, household expenditures have increased with more households joining the consumption. This shows us that consumption takes place in a way that does not create inflation, but reduces poverty.
Another issue that I would like to talk about here is the ignorance of World Bank Country Director for Turkey Johannes Zutt. Given that Mr. Zutt is in charge of following the economic development of a country, he must be more careful while doing this, as it is weird for someone on this mission to speak ignorantly. During the presentation meeting of the report, to which the World Bank contributed as well, a couple of days ago, Mr. Zutt said that Turkey's credit growth data has been achieved with artificial credit expansion with reference to CGF.
So, let us remind Mr. Zutt of the following facts:
The Council of Ministers' resolution on the increase of the CGF bailment to TL 250 billion ($70 billion) from TL 20 billion was issued on March 10, 2017, and with the protocol signed with the Undersecretariat of Treasury on March 15, 2017, a credit volume of approximately TL 181.8 billion was reached in 277,510 enterprises as of May 23, 2017.
The most important factor in the quick functioning of the new bail system is the correct establishment of the structure and the change and institutionalization policy that the CGF adopted in 2016. As a matter of fact, the CGF, which has become the biggest credit guarantee institution in the world today, and its original model, has attracted the attention of many financial institutions around the world. The reputable financial institutions request information to understand and learn about the functioning of the system and express their admiration for the fast, healthy and result-oriented structure of the system. They point out that they see Turkey achieving these results without directly using public resources as a great success when compared to the results obtained in the U.S. and Europe after the 2008 financial crisis despite the extensive use of public resources. The CGF's dynamism is a dynamism created entirely by the Turkish private banking system and the public banking functions merely as leverage here.
The following comparison of the CGF and banking sector data reveals how successfully the system runs. Thanks to the internal dynamics of the Treasury bail system (the upper limit of the repayment is 7 percent), they have their own auto-control systems and are ensured by banks to manage their credit portfolios with this consciousness. In this way, their enthusiasm and trust have been gained. This is a significant success in terms of the sustainability of the system.
The total cash credit size of 27 banks, which are our partners, reached TL 1.443 trillion on April 30, 2017, from TL 1.33 trillion on Dec. 31, 2016, soaring by TL 113 billion, which corresponds to 8.5 percent. A total of TL 95.3 billion of these credits have been provided by the CGF. This increase was mainly thanks to private banks, with Türkiye İş Bankası, Garanti Bankası and Akbank becoming the first three banks.
75.4 percent of the CGF loans were provided by private banks, 22.7 percent by public banks and 1.8 percent by participation banks.
90 percent of loans were provided to small and medium size enterprises (SMEs) and 10 percent to non-SMEs, while 66 percent of total loans were provided to micro and small enterprises.
64 percent of the loans were provided new loans, 31 percent were additional, and 5 percent were renewal / refinancing loans.
29.4 percent of the loans were provided to the manufacturing industry, and 44.6 percent were provided to trade and services sectors.
The average credit size of the provided loans was TL 492,000.
90 percent of the credits were provided in lira and 10 percent were provided in foreign currencies.
The average interest rate of business loans is 14.4 and the average interest rate of investment loans is 13.8 percent.
The average maturity of business loans is 40 months and the average maturity of investment loans is 61 months.
With this project carried out by CGF,
Enterprises have been enabled easier access to affordable costs, maturity and financing.
The banking sector has been enabled to provide loans while they were previously unable to do this because of capital adequacy ratio.
Thus, many enterprises have been prevented from going bankrupt, the healthy growth of the banking sector has been ensured, and estimated 1.5 percent additional contribution to the 2017 growth of Turkey has been made.
CGF has also taken steps to transform the outdated mortgage system and project risk in the banking system into credit risk and developed a relevant collateralization system that provides credit facilities accordingly.
Mr. Zutt and those who are ignorant of Turkey like him should study their lesson well from now on. In fact, it is not about Mr. Zutt, but the fact that the credit growth pace of the Turkish economy has brought a new economic growth and development model which highlights market-friendly and inclusive growth. I think the World Bank should study this inclusive growth well. The World Bank, which offers programs to the poor countries of the world to further impoverish them and then pretends to help them with factitious aid programs, should revise itself by looking to Mr. Zutt's ignorance and analyze Turkey's growth story well.
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