(Updates with comment from bank in fourth paragraph.)
Nov. 29 (Bloomberg) -- Turkey’s central bank said credit growth slowed in the third quarter to “reasonable” levels and must stay there if the country is to see a lasting improvement in the current-account deficit.
It’s also “crucial” for a sustainable gap that the government take promised steps on public spending, increasing the savings rate and cutting dependence on imported energy, the Ankara-based bank said in a summary of the Financial Stability Report released today.
Bank Governor Erdem Basci has put ensuring financial stability at the forefront of policy since he came to office in April. A current-account gap of about 10 percent of economic output this year is the main source of worry for stability, Deputy Prime Minister Ali Babacan said on Nov. 23. Basci has slowed lending by raising the reserves banks have to set aside against their liabilities and allowed the lira to weaken by about 17 percent against the dollar this year to help exports.
As a result of those measures, “domestic demand and external demand have started to rebalance,” the bank said today, adding that it has “the healthy balance sheet and strong policy tools needed to provide the flexibility to minimize the impact of global problems on our economy.”
Turkish banks won’t have difficulty meeting their external debts next year, the bank said, pointing to the foreign-currency borrowing facilities it offers and the reserves it forced lenders to put aside.
--Editors: Jennifer M. Freedman, Heather Langan
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