The regular meeting of the Istanbul Chamber of Industry (ICI) Assembly in July was held at the Odakule Fazıl Zobu Assembly Hall with the main agenda of "The Importance of Quality Financing Policies Supporting the Real Sector in terms of Production and Exports". Participating in the July assembly meeting chaired by ICI Assembly President Zeynep Bodur Okyay, President of the Central Bank of the Republic of Turkey (CBRT) Prof. Dr. Şahap Kavcıoğlu made evaluations on the agenda.
In his speech on the parliamentary agenda, Erdal Bahçıvan, Chairman of the Board of Directors of Istanbul Chamber of Industry, pointed out that the global economic climate is turning against the Turkish economy and that measures should be taken as of today in order to minimize the negative impact of the exporting industry sector and the economy from this situation. should not be abandoned,” he said.
In his speech to the industrialists, CBRT Chairman Şahap Kavcıoğlu stated that the Turkish economy showed a very successful and strong performance compared to other countries during the pandemic period, and said, "In this context, our economy grew by 2021 percent in 11 and displayed a very strong growth performance compared to other countries."
The assembly meeting was opened by ICI Assembly President Zeynep Bodur Okyay. Okyay made the following assessment regarding the agenda at the meeting:
“In the face of the SME preference and suggestion that has come to the fore recently, it should not be difficult for corporate companies to access credit. Supporting the real sector with credit, liquidity and capital-related policy combinations that will be designed in line with the unique conditions of our country is essential for the sustainability of medium-long-term economic growth and productivity. Urgent support should be provided to support companies through loan guarantees and loans, to prevent problems such as low equity investments and debt rollover problems that remain serious for the Turkish real sector. In order to achieve this balance, it is important that the implementation is carried out with a targeted, selective and long-term impact program aimed at the most productive and priority sectors. In the planning of the support to be provided, applying it subject to various criteria such as existing supply chain gaps, international competitive environment, economies of scale, development/leap potential and green/digital transformation investments will increase the impact”.
ICI Assembly President Zeynep Bodur Okyay then invited ICI President Erdal Bahçıvan to the rostrum to make her parliamentary speech. In his opening speech, Bahçıvan also shared a series of problems faced by Turkish industry and exporters. Bahçıvan mentioned that the level reached in consumer prices creates uncertainty regarding the course of domestic demand and pricing, adversely affected the competitive conditions of foreign producer prices, and the ongoing uncertainties regarding the course of the lira despite the positive steps taken. expressed.
At this point, Bahçıvan, who gave a wide place to the importance of accessing Eximbank rediscount loans, said:
“TRY commercial loan interests in banks have exceeded the 40 percent band, and as our risk premium is unfortunately based on historical levels of 900, borrowing opportunities from abroad have been minimized. Banks and companies have difficulties in borrowing from abroad and are faced with double-digit foreign currency interest rates. In this sense, it is very clear that the rediscount credits originating from Eximbank are a vital resource for Turkish exporters. Eximbank has become the strongest financial business partner and source of supply for our exporting industrialists in recent years when there have been serious difficulties in accessing financial resources. Undoubtedly, the dynamic and new generation projects implemented by Eximbank contributed greatly to our exports reaching the level of 250 billion dollars. Therefore, as of June, the obligation to sell 40 percent of foreign exchange income to the Central Bank and 30 percent to banks in order to use rediscount credits, and the commitment not to buy foreign currency in the following month, made it difficult for our exporters to access quality finance and also created exchange rate losses. and nevertheless, it had a very negative impact due to the serious operational burden. It should not be forgotten that our industry needs foreign currency in order to import the raw materials and intermediate goods required for production and export and to realize the necessary investments. I would like to emphasize that a large part of the income from exports is spent on these areas, that our industry has never aimed to generate income from foreign exchange, but that this foreign exchange income is vital for its production and exports to continue. The fact that Eximbank has reduced the credit taps to a large extent in the last period has also affected our companies very negatively. In this sense, as I have just mentioned, not being able to reach Eximbank resources for our exporter, who is already suffering from a shortage of resources in alternative markets, is increasing problems that cannot be compensated.”
Bahçıvan underlined that at the end of June, they witnessed that the step of the BRSA, which imposed a foreign currency asset limit on companies' use of TL-denominated loans, made it more difficult to access loans and prolonging the time in today's world, where sometimes even minutes matter, “If this picture continues with the same point of view in the next few weeks, the process will continue. We regret to say that it will be much worse. Again, ISO 500 and ISO Second 500 results show that; While business activities are being financed more and more by borrowing, there is a noticeable shortening in the maturity structure of the debt. In addition to these, from the debts of industrialists to banks in 2021; The increase in debts to other companies at a much faster pace draws attention as a new situation. In these days when financing conditions are tight and credit opportunities are narrowing, this situation of our industrialists raises concerns as it points to the risks of payments that may develop as a chain reaction, as I emphasized in my recent statement. In addition, I would like to say with regret that we are on the eve of some developments that will adversely affect our economy, especially export figures and production figures in the near future, if the process continues in this way.”
Based on these problems, Bahçıvan emphasized that their general expectations as industrialists are to normalize credit and financing opportunities and to end or stretch practices that do not comply with real sector realities.
“Eximbank should regain its financing functions as soon as possible. Restrictive provisioning decisions on banks' credit facilities should also be relaxed. Similarly, the CBRT should relax the conditions for holding and exchanging foreign currency in TL rediscount credits. When we look at the issue in terms of investment, which is vital for our industry to continue its production and exports, we see the Central Bank-sourced investment advance loan, which is provided through public banks, as a very important financial instrument in terms of our investor companies' access to cost-effective financing and fulfilling their commitments. However, it is of great importance that the processes regarding investor applications within this scope are operated much more quickly and that our investor companies have access to this financing tool more effectively. Finally, I would like to mention our commercial relations with Russia, one of our most important export markets. Due to the war that has been going on for more than five months between Ukraine and Russia and the international sanctions imposed on Russia, it is not possible for the export prices made to this country to come to our country in dollars or euros. Making the trade between Turkey and Russia in rubles would be a solution to this problem. When our exporters come to Turkey in rubles, the ruble should be quickly converted into TL in the Turkish banking sector.”
Şahap Kavcıoğlu, President of the Central Bank of the Republic of Turkey, who came to the rostrum as the guest speaker of the ICI July Ordinary Assembly Meeting, stated that the process has become more aggravated and uncertainties have increased due to the effects of the Russia and Ukraine crisis that broke out in the first quarter of 2022 and the ongoing negative supply shocks. told. Kavcıoğlu said, “However, despite the negative supply shocks, domestic economic activity continued its strong course in a sustainable and uninterrupted manner. In this framework, the annual growth rate in the first quarter of 2022 was 7,3 percent. Our expectation for the second quarter is that the growth will be close to this rate," he said.
Pointing out that the share of net exports and machinery-equipment investments in this strong growth is quite remarkable, Central Bank Chairman Kavcıoğlu underlined that net exports have contributed positively to growth for the last 5 consecutive quarters, when viewed from the expenditure side. Stating that machinery-equipment investments also contributed positively to growth in the post-pandemic period, Kavcıoğlu said, "On the production side, the service and industry sectors continued to contribute to growth."
In addition, Kavcıoğlu emphasized that the share of machinery-equipment investments and net exports, which are supportive components of the strong and sustainable growth performance of the Turkish economy focused on increasing production, exports and employment, has steadily increased in the national income. stated that its total share reached its historical high level at 2022 percent. Central Bank Governor Kavcıoğlu said that the steady increase in machinery-equipment investments will increase the supply capacity of our economy and contribute to permanent price stability.
CBRT Chairman Şahap Kavcıoğlu continued his speech with the following words:
“The Turkish economy is in a process of structural transformation, which focuses on increasing investment, employment, production and exports, and on which you are the focus. Adjusted for cyclical effects, the Turkish economy had a current account surplus for two consecutive quarters for the first time since this analysis began in 2004. In other words, this new balance indicates that our economy will reach the current account surplus capacity, the need for short-term financing is minimized, and export-led growth when global energy and commodity prices start to normalize. This is the beginning of a new era for our country. In other words, the fact that the Turkish economy will have a current account surplus while growing will ensure that growth and price stability will be permanently established on a sustainable path. As the Central Bank, we are determined to ensure that this historical opportunity, which is overshadowed by the energy price increases and which we have identified with the data, is permanent with the policies we are implementing.”
After the speeches made at the ICI July Ordinary Assembly Meeting, the ICI Assembly members took the floor and continued with their evaluations on the main agenda topic and their thoughts on the current process of the industry in this context. The questions of the members of the assembly, who also asked the CBRT Chairman Kavcıoğlu about the Central Bank's monetary policies, were answered by Kavcıoğlu.