Turkish gov’t reveals new measures aimed at fueling economic activity
ANKARAAnkara has announced a number of new measures on credit cards and loans in an attempt to ease the strain on consumers and stimulate economic activity.
Prime Minister Binali Yıldırım said late on Sept. 21 that credit card payment installment limits had been increased from nine to 12, while restrictions on food, telecommunications and fuel purchases would continue.
Yıldırım added that credit card debts could be restructured for up to 72 months.
“At the latest Economic Coordination Board meeting, we decided to increase the possible number of credit card payment installments to 12. But this will not be the case for food shopping … The installment limit for consumer loans has also been extended to 48 months,” he said.
“Credit card debts will also be restructured. These limits had been calculated at a maximum of four times the cardholder’s income, meaning that as the minimum wage is 1,300 Turkish Liras, the limit was 5,200 liras. The bottom limit has now been defined as 5,200 liras,” Yıldırım noted.
The minimum deposit rate for housing loans has also been lowered from 25 percent to 20 percent as part of the changes.
“When you bought a house for 100,000 liras, for instance, you previously needed to offer a deposit of 25,000 liras and you could seek bank loans for the remaining 75 percent. The loan rate from banks has now been increased to 80 percent with the new regulation,” Yıldırım added.
He also noted that the loan rate in leading transactions had been increased to 100 percent.
Speaking in a televised interview on Sept. 22, Deputy Prime Minister Şimşek said the changes aimed to stimulate consumer spending after a period of slowing growth.
“We have seen a temporary slowdown in economic growth since the second quarter, deepening in the third quarter … The latest measures should be considered in this vein,” Şimşek said.
The rise in consumer loans has been on downward trend in real terms and the rise in total loans has also been very close to the inflation rate, marking a steeper regression in loans than the government had foreseen, he added.
“We have not eased credit card installments for imported goods, mainly focusing on a general framework to boost domestic demand as well,” said Şimşek, stressing that there had been no easing in mobile products, most of which are imported.
He said the banking sector’s hand had been strengthened through these measures.
“These measures will positively affect the growth, but they will have only a limited impact on the current account gap or the inflation rate,” Şimşek added.
Food committee revised
Meanwhile, the government has also announced reforms to its Food Committee, which will work to prevent “unfair rises” in food inflation.
“The restructured Food Committee - which will be headed by Şimşek and be comprised of the economy minister, the agriculture minister, the customs minister, the development minister, and the finance minister - will take the required measures by considering sudden fluctuations in food inflation. The secretariat will be the Central Bank,” said Yıldırım.
Şimşek also noted that Turkey has been suffering from a dramatic wave of fluctuations in food prices.
“The restructured mechanism will be able to take immediate measures when there are any artificially, speculation-based prices in food prices … The inflation rate has been increasing in Turkey mainly due to two factors: Foreign exchange rates and food prices. We have now taken a structural step to resolve problematic rises in food prices. Inflation expectations should be made in this vein,” he said.