K. Murat Yıldız / Duvar English
Consumer loans and credit card spending increased dramatically in the week leading up to the Eid holiday, according to data from Turkey’s Central Bank and the Banking Regulation and Supervision Agency.
While pre-holiday consumer loans reached 880 billion TL, up by 0.5 percent from the previous week, total credit card expenditures reached 36.9 billion TL, up by 6 percent from the previous week hitting an all-time high. Commercial loans, on the other hand, were nearly frozen during that same time period.
“Consumer loans and credit card purchases are processes that must be repaid in the near future, and if they are not, legal proceedings, enforcement, and foreclosure are triggered. As a result, there may be serious stumbling blocks in repaying such large credit and card expenditures within a few months, and legal proceedings may skyrocket during this time,” the main opposition People’s Republican Party (CHP) warned in a written statement.
Travel expenses rise dramatically
According to official data, compared to last year, airline travel expenses increased by 262 percent, accommodation expenses increased by 244 percent, travel agency expenses by 157 percent, and car rental expenses by 135 percent.
During the long Eid holiday, 95.5 million vehicles were on the road, while 12 million "ticketed passengers" traveled by road, rail, and air. With the sale of 107 million liters of fuel in one day, an all-time high was set.
“This data shows that, in addition to the Eid holiday, which was extended to 9 days following the long epidemic period bans and closures, holiday and travel activity grew significantly, yet these expenses were financed through consumer loans and credit cards,” CHP İstanbul Deputy Erdoğan Toprak pointed out and added that “Thanks to credit and card expenditures, the economy is able to survive, and it seems that an extraordinary dimension of demand, consumption and expenditure has emerged with these expenditures made by borrowing from future incomes.”
New record in credit card spendings
The deputy also warned the government by saying “This week's credit card spending set a new record of up to 37 billion liras. In a few months, the extremely high demand it generates will show its negative effects on inflation and the current account deficit.”
While these consumption-based expenditures will theoretically trigger 1-2 months of economic growth, the main issue is seen in the size of commercial loans.
“Commercial and investment loans are nearly frozen, indicating that there is no upward trend in these loans and that there is no expectation of long-term, consistent growth,” the deputy noted and predicted that within a short period of time, sharp decreases in demand and consumption will come to the fore, and commercial and investment activities and growth will be adversely affected.
Toprak is not the only with those concerns.
Government aims to 'save the day'
“Individual consumption increased exponentially after 2020, when the pandemic broke out and harsh measures were undertaken, as a result of postponed demands. The lack of similar growth in the commercial sector, on the other hand, poses a risk. For the manufacturing industry, a 1-2 month increase in demand is insignificant. The expected industrial growth will not occur unless there is a sustainable demand,” economy columnist Taylan Büyükşahin told Duvar English.
Büyükşahin also warned that “high production costs, inflation, a drop in demand, and concerns about the fourth wave of the epidemic will all add to the economy's uncertainty in the coming months, possibly causing another contraction.”
“What the government should do is take steps to ensure long-term production growth. Unfortunately, we can see that there is no such agenda, that there are no policies other than the ones that will save the day and will only increase consumption,” he concluded.