Turkey: macro-financial situation

Paula Sánchez Pastor
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Paula Sánchez Pastor: Banco de España

Economic Bulletin, 2023, issue 2023/Q1, No 07

Abstract: Rationale Turkey is identified annually as a material country for the Spanish and euro area banking systems. Moreover, Turkey and Spain are linked by major trade and financial flows. It is therefore important to monitor the country’s macro-financial situation and main weaknesses. Takeaways. • The Turkish economy continued to post very high inflation rates at end-2022, while economic activity began to slow in Q3, following its strong previous momentum. All of this in the context of sizeable external financing needs, foreign currency debt and low international reserves. • Fiscal policy performed better than expected, and the country’s accounts remain healthy. In terms of monetary policy, in August the Turkish central bank resumed the process of reducing the policy interest rate initiated a year earlier, with the real interest rate standing at -75.5% in November. • Nonetheless, macroprudential and regulatory measures were implemented to keep credit growth in check and encourage only lending to certain productive sectors. Meanwhile, the banking sector’s balance sheets remain relatively healthy, although some indicators have worsened.

Keywords: Turkish economy; macroeconomic imbalances; inflation; current account balance; capital flows; monetary policy; Turkish lira; international reserves; bank lending (search for similar items in EconPapers)
JEL-codes: F31 F32 F34 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:bde:journl:y:2023:i:01:n:07

DOI: 10.53479/27331

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