year, cl mbed to TRY 795 b ll on at the end of August, a full 66 ncrease n e ght months. But the cause was not actually new loans but the decl ne n the l ra: At the end of August, the dollar rate was 6.41, a 69 percent ncrease n e ght months. In fact, there s no real growth n fore gn currency loans and rather a full-blown contract on.
TRY-denom nated loans, wh ch were TRY 1.272 tr ll on at the end of last year, decreased by approx mately four percent as of November 16 compared to ts peak of TRY 1.366 tr ll on at the end of July.
Why s loan volume decl n ng?
F rst, banks worry that econom c cond t ons w ll become more d ff cult and borrowers w ll f nd t more d ff cult to pay back the r loans. So banks are not w ll ng to lend. Second, nterest rates rema n h gh desp te efforts to lower them, espec ally by publ c banks, wh ch has a negat ve mpact on loan demand.
The th rd factor s ntertw ned w th the second. As conf dence n the economy s low, bus nesses are hold ng back on us ng cred t. Th s decl ne n cred t volume, even n the current per od, s a lead ng nd cator of how econom c growth has not only decelerated, but begun to shr nk.