Turkish Treasury and Finance Minister Mehmet Simsek urged commercial banks to prioritize growth in corporate loans, stressing the need for lower consumer spending to rebalance the Middle East’s largest non-oil economy.
(Bloomberg) — Turkish Treasury and Finance Minister Mehmet Simsek urged commercial banks to prioritize growth in corporate loans, stressing the need for lower consumer spending to rebalance the Middle East’s largest non-oil economy.
“It’s of great importance to support exports. The era of private lenders solely focusing on consumer loans should be a thing of the past,” Simsek on Thursday told Turkey’s banking association, known by its Turkish initials TBB.
The economy czar has endorsed higher interest rates to slow domestic demand and rein in inflation since he took over following President Recep Tayyip Erdogan’s reelection in May. The new central bank governor installed after Simsek returned to office has raised Turkey’s benchmark interest rates by a total 900 basis points.
The monetary tightening will continue but needs to be supported by a change in the composition of new loans in the banking sector, Simsek said. Annual growth in credit to corporates stood at well below 20% at the end of July, half the pace of expansion in consumer loans during the same period, according to the latest official data by the central bank.
Simsek — a former Merrill Lynch strategist — is pledging a return to relative orthodoxy after years of growth-at-all-costs policies endorsed by Erdogan in the run-up to the presidential elections.
But there’s a limit to what Simsek can do as Erdogan prepares for municipal elections in March, with his party eager to win back Istanbul after a stinging defeat there in 2019.
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