Anxiety is mounting in Turkey that the debt difficulties of large companies amid the country’s economic turmoil are being transferred to the balance sheets of banks under government pressure.

Such a line was taken by Atilla Yesilada of Global Source Partners, who on December 17 told VOA: “I understand through my conversations with bankers, AKP [Turkey’s ruling party] or government officials are intervening in favour of large companies, for the banks to restructure their loans. The problem is shifting from corporate balance sheets to bank balance sheets.”

As a result of the situation, banks cannot issue new loans, Yesilada, said, adding: “… so this is a vicious circle from which there is no way out. The solution is you have to inject fresh cash, fresh resources, fresh capital into the economy. We are talking $50-60bn to fill the tank and get the car going. No one has that kind of money, except the IMF.”

Erdogan has ruled out IMF
Turkish President Recep Tayyip Erdogan has ruled out IMF assistance amid the difficulties sparked by the currency crisis that peaked in Turkey during the summer.

Analysts say that with crucial local elections for control of Turkey’s main cities and other municipalities due on March 31 next year, Erdogan will be reluctant to look for international help, given that ending Turkey’s dependence on IMF support is one of his most significant achievements.

“All the [opinion] polls show me, the main concern for the voters is the economy, and they are going to register their protest in local elections,” Yesilada was also reported as saying. “My estimate, AKP will lose five percentage points; I expect AKP to suffer great losses, I would not be too surprised if they lose Istanbul or Ankara.”

The Turkish private sector had obligations to repay $64.75bn in foreign-loan principal payments within one-year as of end-October, down from $66.3bn at end-September, the central bank said on December 14.

Turkey was obliged to repay a total of $173.8bn in foreign debt within one-year as of end-October, down from $176bn at end-September, the central bank added on December 17.

"Horrendous" industrial output data
Yesilada was also cited as saying that Turkey’s latest industrial production figures, which record a 5.7% y/y decline in October, were “horrendous”.

“Industrial production was the most disappointing visa vie the consensus,” he added. ”We’ve seen annual production contraction by more than five percent. It looks like despite success in exports, domestic demand is weak, or producers are very hesitant to start domestic production.”

A Bloomberg survey had predicted an annual contraction of 4.3% in October. The October data followed the decline of 2.4% y/y (revised figure) recorded for September. 

“The weaker-than-expected Turkish industrial production data for October suggest that, after contracting in Q3, the economy has probably entered a technical recession in Q4. Weak economic growth, coupled with last month’s fall in inflation and the recovery in the lira, means that the central bank is likely to push ahead with rate cuts at the start of next year,” Jason Tuvey of Capital Economics said in a research note entitled “Output slumps, economy probably in technical recession in Q4”.