Construction forges ahead in debt, industry left behind

Turkish private sector’s loans have been rising and the composition of these loans shows that most credit is used by the construction and real estate sector The Central Bank announced last week that, as of end of September, the Turkish private sector’s long-term loans have reached $164 billion. Indeed, this is not even the entire outstanding external debt, but only a part of it. Alongside long-term debts, the private sector also has short-term debts of $112 billion, while the public sector has $108 billion long-term and $18 billion short-term debts, totaling $126 billion. This means that Turkey’s total outstanding external debt is approaching $402 billion, a burden that is more than 50 percent of Turkey’s national income. Also, 40 percent of these loans have to be renewed and paid back within 12 months, which imposes a significant amount of fragility and pressure on Turkey’s economy.

For a country with a domestic savings rate of only 15 percent, it is essential to find external sources, or in other words, use others’ savings for its growth. But isn’t it also an important question where the source of this debt is taken from, and whether it is used properly or not?

The private sector owns 69 percent of the outstanding external debt, or $402 billion of it, while the public sector has the other 31 percent. In order to understand the source of this debt, how it has been used and whether it has been used properly, it would be appropriate to look at the sector analyses of the external credits that the private sector has obtained.    

The composition of the private sector’s long-term loans indicates a source mostly from the construction and service sectors, more than production sectors. Almost 39 percent...