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French bank claims Turkey headed for a recession

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An analysis released by French bank BNP Paribas has claimed that Turkey is heading for a recession that will last several quarters.

The analysis was part of the first quarter edition of a report titled “Eco Emerging,” which presents the Paris-based bank’s views on the outlook of emerging economies around the world.

The section on Turkey, titled “Large-scale maneuvers,” stated that the financial strain has eased since a currency crisis in August 2018 but that cyclical conditions have deteriorated.

“With the approach of municipal elections on March 31, which will be another key test for the government, major maneuvers have been launched on both the macroeconomic and geopolitical fronts to stimulate activity and advance a foreign policy agenda (notably in Syria) at the expense of diplomatic tensions with the US,” the report said.

The analysis based the recession scenario on the sharp depreciation suffered by the Turkish lira, soaring inflation and interest rates, the contraction of bank lending and the dire financial straits of numerous companies.

The construction sector, which has been the main growth engine in recent years, displays a gloomy outlook as recent Turkish Statistics Institute (TurkStat) figures pointed to a significant decline in year-on-year housing sales.

“Corporate and household confidence indexes have rebounded slightly since October but are holding at very low levels.”

Another indicator of the financial strain experienced by the companies was the surge in requests for debt restructuring lodged by non-financial companies.

Officially, 846 Konkordato bankruptcy protection procedures were initiated in December 2018.

The banking regulator has asked commercial banks to honor all requests for debt restructuring in order to prevent bankruptcies, the analysis said.

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