Turkey to suffer from credit card debts and non-performing consumer loans

Talking about how well the Turkish economy has performed in the last couple of years and the growth in the national income as well as the alleged increase in the purchase power of Turks, we know well how much the government was praised by local and international experts and all…

In fact, it is definitely true that the consumption in this country has sort of sky-rocketed and suppliers of consumption products as well as items such as cars, houses etc. have enjoyed satisfactory sales..

The bitter reality about this bright performance though is that people have not earned a great portion of the money required to realize all those spending. They have used loans, both in the form of credit cards and consumer loans provided by the banks.

Now, when it has come to paying back the loans this is where the Turkish economy is considered to be very fragile. To make it more simple Turks have spent MUCH more than they have earned. Now it’s time to return those monies. But where are they and how is this thing going to happen? This is the big challenge Turkey may have to face any moment.

When we look at below figures we can tell how solid this argument is;

Figures say the total debt on Turkey’s 57 million credit cards stands at around $45 billion and the volume of nonperforming consumer loans is at $14 billion. This corresponds to a 20% increase since the end of last year. According to sources around 1.7 million credit card holders were unable to pay their debt in the first nine months this year, compared with 277,000 in the whole of 2009 – which is strikingly frightening.

As for what could be done to cure this situation, authorities have decided to react by tightening rules for credit card use and consumer loans. Sadly however, more than 2 million Turks are said to have already defaulted.

In fact, to show the government’s concern about the problem, Prime Minister Erdogan did not miss the opportunity of warning Turkish citizens of high interest rates on credit card debt  during a speech in Fethiye and said “My citizens should be careful when they get a credit card. Also credit card holders should not spend more than they earn. Otherwise debtors would risk losing everything they own in case of defaulting. They will take away everything you own.”

As seen that was a harsh language to warn consumption-addicted Turks who seem not to have realized the approaching danger so far.

As for the success Turkey has displayed during the last 10 years, the country has enjoyed a spectacular economic boom that has more than tripled gross domestic product (GDP) from $270 billion in 2002 to $820 billion last year and transformed the country. The unprecedented upswing has put additional money into the pockets of millions of ordinary citizens, many of whom have gone on a spending spree, buying everything from cars and electronics to refrigerators and apartments to an extent never before seen in Turkey.

But obviously this will not be enough to save many from saddening undesired situations in case of entangling into trouble due to un-returned loans.

04.12.2013
Editor