Published On: Sun, Aug 19th, 2012

Turkey Weekly Economic Outlook (Week 32/2012)

In the first quarter of 2012, improvement signals in the balance of current account and inflation will be more powerful, leading  better conditions on the economy, if the economy in the second quarter of 2012  moves as in the first quarter.

However, the economy authorities have also been trying to accommodate  the market to the possibility that the economic growth rate might realize below   %4.

If we look at two important reports announced last week, we can summarize important points as the following:

According to the  first quarter’s  Survey of  Economic Condition conducted by ISO (Istanbul Chamber of Industry) in the first half of 2012, the number of the corporations which announced increases in all the economic indicators  was  lower than the number in the second half of 2011, whereas the number of those which informed decreases in all the economic indicators raised.

While the survey of the first half of 2012 has been considered  to have  ‘’a little more negative‘’ conclusions from the last half of 2011 until the end of the first half of  2012, corporations that informed increases  had deterioration decreasing to % 49 from %53.4 in production, decreasing to %46,1 from %52,1 in domestic sales, decreasing to %43.1 from %44.7 in external sales, decreasing to %46.9 from %38.8 in the number of new purchase orders and  decreasing  to %38.9 from %42.5 in employment.

The corporations that announced decreases had an improvement in domestic sales reaching %26.3 from %18.1 as the external sales reached %30.8 from %23,2. The new purchase orders reached %25.1 from %16.9 and the employment reached %25.2 from 17,3.

According to the interpretation part of outcomes of the survey, it is emphasized that the number of the corporations having problem in the fundamental economic indicators has risen substantially. Moreover, a 10.4 point increase in corporations with problems in domestic sales was attributed as an important indicator showing the recession in demand.

In addition, the fact that more than one-third of corporates had difficulty in generating sources was also highlighted in the study.

The fulfilment rate of sales targets in first half of 2012 decreased to %72.8 from %75 in the previous half. Indeed, the fulfilment rate of sales targets displayed a downward trend in all measures.

In spite of the observation that the inflation rates have exceeded low interest rate facilities and exchange rate increases which lead corporates to extensively use of foreign currency loan during the last years, things seem to move in reverse as of the second half 2011.

However, both relative decreases in lending rate and the absence of significant movement in exchange rate, have urged to utilize again foreign currency or foreign currency loan at a large extent.

Considering the data with respect to the composition of  loans used by corporations, it has  been stated that  the ratio of loans indexed to foreign currency plus  foreign currency loans used by large-size enterprises  to total credit is higher than %70, while this ratio regarding small size enterprises is %44,3  and %51.8 regarding medium size enterprises.

In fact, the crucial part of the study is exactly the expectations of industrial enterprises about overall developments in national economy. In this context, GDP growth in 2012 is expected to be % 4.1 and Producer Price Index (PPI) is expected to be % 8.5 while the expectation on Consumer Price Index (CPI) is %8.6.

The USD-Turkish Lira parity in 2012 year-end expectation  of  enterprises participated to the study  is 1,86, as  their expectation in Euro-Turkish Lira parity is 2,35 TL. Considering these anticipations, Euro-USD parity seems to realize at the value of 1,26.

On the other hand,  ‘shadow economy and unfair competition ’ was appointed as the biggest problem among the difficulties enterprises faced  with rate of %15,6. This was followed by ‘ high levels prices of energy, raw materials and tax rates’’  and then followed by  ‘declines in profit rates’.

The other important report is June 2012 Report publish by Banking Regulation and Supervision Agency. According to the report, the net profit has reached 11 billion 552 million liras, displaying  a significant increase with  %11,4 comparing to the same period of previous year .

As of June 2012, the value of loans has increased by % 8, reaching 54,3 billion lira. Besides, the annual growth rate in credits that increased its proportion among total assets by 1,8 point, reaching  %57,9  has occurred %18.8.

While the upward trend in delinquent receivables continues, it has reached  the value of 20,1billion lira with an increase of 1,1 billion lira (%6.1)

As compared to the end of 2011, the biggest increase with 591 milion lira among the delinquent receivables has been observed in personal loans. On the other side, delinquent personal\corporate loan has increased by 332 million while the value of loans of SME (small size enterprises)  increased by 242 million lira.

Considering assets growth of Turkish banking sector, three main factor has made the funding of asset growth move towards abroad: the regulations made by Central Bank Of Turkey on the availability of banks to hold TL liabilities in  terms of foreign currency and gold at some extents, expansionary monetary policy measures ,taken by central bank of developed countries ,against global economic problems, and the cost advantage of external borrowing.

The total value of foreign currency loans of Turkish banking sector has increased by %8.3 (8,1 billion US dollar),rising to 105,7 billion USD. The vicious processes observed in the European Union-member states caused a decline the proportion of foreign borrowings taken by the Eurozone to total foreign borrowings whereas the proportion of foreign borrowing provided from Middle East and Asia –centered financial institutions has risen substantially.

The banking sector increased open positions on balance sheet due to the extensive utilization of swaps till the last of first half 2012 while the total value of loans owed to banks has increased by %10,3 (24 billion dollar) and required reserves in terms of foreign currency and loans only increased by %4.9 (9,6 billion dollar).

The strong capital structure of the banking sector has been remained by generating reserve fund two times more than the total value of paid-in capital of balance sheets thanks to implications of BRSA, which are the constration of dividend distribution and incentives to accumulate profit inside.

The sector’s capital adequacy standard ratio is %16,5 as of June 2012.

According to the report, Turkish banking sector has maintained its strong stance in liquidity, quality of assets, capital adequacy and profitability even though a slowdown was faced for a while in the first half of 2012.


Positively affected by Merkel’s soft manner and expectations in monetary expansionary policy measures together with good news coming from employment data of the U.S, markets are again back to red area owing to ongoing confusion in the Eurozone and anxieties about the risk of worsening the sovereign debt .

The parity, which rose to 1.2438, has decreased to 1.2250. Showing a downward trend for medium and long term, the parity would keep going on in this trend according to our expectations. However, in order for this downward trend to be strong, there must be a rotation after a rise to 1.2520-1.2540. If there would not be a rotation after such increased levels, which means breaking the trend, the strong increase would start up to 1.32.

This week, 1.2170-1.2320-1.2438 are important levels. Expected to move along this interval, the parity might decrease to 1.2050 at the bottom, or might rise to 1.2500-1.2520 in case of important processes\or developments.


Euro is still losing ground. Facing depreciation on the global basis, has been moving below 2.2020,a level regarded as critic.

If the parity persist around the levels below 2.2020,we expect that Euro would depreciate.

2.2020 is the most critical level of this week. In case of below this level, the parity would be 2.1900-2.1700.On the other hand, in case of exceeding the critical level.


As seen in the graph, the parity which has been trying to get back in its upward trend is moving horizontally.1.8085 is the critical level. In case of exceeding this, the parity would be around 1,85 or above 1,85 again.

As long as the parity doesn’t surpass 1.80, we expect that efforts made for catching the upward trend would definitely be ineffective.1.7730-1.7930-1.800 and 1.8085 are the critical levels for this week. We expect that prices would move along this interval.

Apart from these critical levels, in case of important processes or developments, the parity might be 1.7520 at the bottom and 1.8300 at max

Financial Market Analyst


Mr. Yasin BALCI writes brief reports about finance markets in Turkey, on We believe and hope our visitors will benefit from his findings in this regard.


Mr. BALCI  graduated from Gazi University Econometrics in 2009. After the graduation  he worked in different brokerage companies as  ”money market analyst”.  Cureently, he is a financial specialist at a private company and also doing master degree in Finance at Istanbul University. He is a consultant for Forex markets analysis methods.