Turkey’s gross external debt stock rose by 2% q/q and 11% y/y to reach $453bn by the end of 2017, the Treasury said on March 30.
Heavy dependence on external borrowing is a sharp reality in Turkey due to the country's chronic current account deficit. Debt-financed consumption has been the prime feature of the remarkable economic growth achieved by the country during much of the past decade, while the private sector’s share in total external borrowing has been on the rise in recent years.
The gross debt stock rose by 2% y/y to $408bn at the end of 2016 from $399.5bn at the end of 2015.
The private sector's share in the country’s total gross external debt stood at 70% or $316bn at the end of 2017.
Turkey’s gross external debt stock corresponded to 53.3% of GDP at the end of 2017, the highest level recorded since Q1 2003. The gross external debt stock to GDP ratio stood at 47.3% at the end of 2016, up from 46.3% at the end of 2015.
Turkey's net external debt stock also increased by 3% q/q and 15% y/y to $291bn as of the end of 2017.
The net external debt stock edged up by 0.4% y/y to $253bn at the end of 2016 from $252bn at the end of 2015.
Also, the net external debt stock to GDP ratio rose to 34.2% at end of Q1, the highest level recorded since Q2 2003.
The net external debt stock stood at 29.4% at the end of 2016, slightly up from 29.3% at the end of 2015.
Turkey’s foreign-currency corporate debt amid the country’s debt-fuelled and consumption-driven growth boom is equal to about 40% of economic output and its cost is climbing every day, putting the nation’s companies in a tight spot, Bloomberg reported on March 29.
Turkey’s corporate foreign-currency debt pile has more than doubled since 2009, with about 80% held by domestic banks. In the same period, the dollar and euro have more than doubled against the TRY.
With an eye on addressing the risk generated by Turkey’s corporate debt and defending the lira, the government has decided to restrict hard-currency borrowing for some of the smallest companies from May. Larger borrowers will be told to hedge against their exposure.
The corporate sector’s foreign-exchange liabilities stood at a record $328bn as of the end of 2017. When the sector’s foreign-exchange assets are subtracted, the shortfall still stands close to a record $214bn.