Turkey’s short-term external debt stock stood at $102bn at the end of March, marking a 4% q/q increase, the country's central bank said on May 16.
Turkey is heavily dependent on external borrowing due to its chronic current account deficit. Debt-financed consumption was the prime feature of the country’s remarkable economic growth achieved during the last decade, while the private sector’s share in total external borrowing has been on the rise in recent years.
As economic growth is now heading for a slowdown and exports remain weak, Turkey’s corporate sector, especially when it comes to tourism firms, may find it challenging to meet their liabilities. Political concerns are also putting additional pressure on the lira, creating a tougher environment for the country’s private firms.
The short-term debt of the public sector rose by 1% q/q to $16.5bn at end-March, while the indebtedness of the private sector increased by 5% y/y to $85.5bn, with private banks’ short-term foreign borrowings having risen 6% y/y to $43.7bn.
The short-term external debt stock on a remaining maturity basis, with the calculation based on the external debt maturing within one year or less regardless of the original maturity, was $163.7bn as of end-March. Some 51% of the total end-Q1 debt was comprised of US dollars and 30% was comprised of euro debt, according to central bank data.
The short-term debt stock declined by 4% y/y to $98bn at the end of 2016 compared to the $102bn recorded at end-2015.
“The outlook is clouded by heightened political uncertainty, security concerns, and the rising burden of foreign-exchange-denominated debt caused by the lira depreciation,” the IMF warned Turkey last month.
Moody’s Investors Service on March 17 lowered Turkey’s rating outlook to negative from stable, citing “the continuing erosion of the country’s institutional strength, its weaker growth outlook, heightened pressure on public and external accounts and the increased risk of a credit shock”.
Moody’s also noted that “weaker growth is negatively impacting Turkey's key credit anchor - its healthy public finances and low government debt”.
|Turkey's Short-term External Debt Stock|
|DEPOSITS WITH CBRT||270||208||176||173||157||131||110||108|
|DUE TO IMPORTS||27,262||27,947||29,459||29,318||31,766||30,824||32,773||34,124|