Turkey Economy Minister Calls on Banks to Lower Interest Rates

By Firat Kozok and Onur Ant

Turkey needs lower interest rates to sustain the rapid growth it posted in the first half of the year, Economy Minister Nihat Zeybekci said, calling on commercial banks to do their part to keep borrowing costs down.

The government will “sit down” with commercial lenders, the banking regulator and the central bank to explore why the gap between inflation and interest on commercial loans is so big, Zeybekci said Tuesday in an interview in Ankara.

 “There are resource constraints — OK,” Zeybekci said. But the government also needs to see if banks “are seeing the market demand as an opportunity and using it for profit maximization.”

Zeybekci is the first cabinet member to support President Recep Tayyip Erdogan’s latest call for commercial banks to lower borrowing costs and make up for the lost revenue by issuing more loans. Previously he had focused on the central bank’s rates, which he said were excessively high and deterred investment. Since Murat Cetinkaya became the governor last year, the economy minister has often pledged support for central bank decisions.

Part of the problem is the high level of interest that banks pay on consumer deposits, Zeybekci said. But government regulations that add to the cost of banks’ lending are also to blame, he said.

Growth Targets

Economic growth has likely accelerated to about 7.5 percent during the current quarter from 5.1 percent in the previous three-month-period, the minister said. Full-year growth will top 6 percent this year and 5.5 percent in 2018, he added, citing planned revisions of the government’s medium-term program, an annual plan that includes specific economic targets for 2017 through 2020.

 

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