World Economy

Debts, Bankruptcies Rising in Turkey

Debts, Bankruptcies Rising in TurkeyDebts, Bankruptcies Rising in Turkey

After years of growth fueled by credit and domestic consumption, bad debts and bankruptcies are rising in Turkey, squeezing banks and exposing a fragile real economy which risks denting support for the ruling Justice and Development Party, or AKP.

In its first decade in power the AKP, founded by President Recep Tayyip Erdogan, built its reputation on growing Turkey’s wealth, overseeing a sharp rise in incomes and providing new roads, hospitals and airports in what was long an economic backwater, Reuters reported.

But as he seeks support for an executive presidency to replace Turkey’s parliamentary system, a decision that could be put to a national vote later this year, Erdogan may no longer be able to count on Turkey’s rising prosperity to win him votes.

Growth is expected to cool to 3.5% this year, the World Bank said late last month, well below peaks of near double digits in the early AKP years. A sharp drop in tourism after a spate of bombings this year and unrest in the largely Kurdish southeast are also taking their toll.

Foreign investors are wary and banks are increasingly reluctant to extend new credit, squeezing the most indebted firms. So far in 2016, close to 240 companies have requested temporary relief from creditors, almost as many as in the whole of last year, according to, which compiles the data.

Istanbul-based legume producer Sezon Pirinc filed for bankruptcy postponement at the end of last year, hit by souring consumer sentiment at home and difficulties in some Middle East export markets.

“The main reason behind our bankruptcy postponement was banks calling their loans earlier than their maturities,” Mehmet Erdogan, the company’s chairman, told Reuters. “This year (2016) will be another tough year.”