Turkey’s short-term external debt rises 4% q/q in Q1

Turkey’s short-term external debt rises 4% q/q in Q1
By bne IntelliNews May 17, 2017

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
(mn USD) Q2-15 Q3 Q4 Q1-16 Q2 Q3 Q4 Q1-17
CENTRAL BANK 270 208 176 173 157 131 110 108
DEPOSITS WITH CBRT 270 208 176 173 157 131 110 108
BANKS 90,125 82,011 64,520 67,982 65,969 62,956 57,354 59,952
CREDITS 37,401 28,751 22,701 19,628 18,963 16,674 14,707 15,335
FX DEPOSITS 13,729 14,857 14,821 15,408 15,801 15,076 13,231 13,239
BANKS ACCOUNTS 25,329 24,102 17,387 18,842 17,236 16,738 17,251 18,256
TRY DEPOSITS 13,666 14,301 9,611 14,104 13,969 14,468 12,165 13,122
OTHER SECTORS 35,145 36,022 37,184 37,831 40,687 39,421 40,518 42,066
TRADE CREDITS 30,970 31,672 33,145 33,031 35,348 34,452 36,440 37,760
DUE TO IMPORTS 27,262 27,947 29,459 29,318 31,766 30,824 32,773 34,124
PRE-EXPORT FINANCING 3,708 3,725 3,686 3,713 3,582 3,628 3,667 3,636
OTHER CREDITS 4,175 4,350 4,039 4,800 5,339 4,969 4,078 4,306
PRIVATE 4,175 4,350 4,039 4,800 5,339 4,756 3,837 4,059
TOTAL 125,540 118,241 101,880 105,986 106,813 102,508 97,982 102,126
source: tcmb

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