Güven Sak, PhD - [Archive]

The total value of bounced checks has doubled 14/11/2012 - Viewed 1881 times

Anatolian tradesmen and industrialists feel the economic slowdown the most.

We are going through an interesting period. Turkey’s economy has been slowing down in a controlled fashion, and is praised for that. Why? Because as the economy slows down, accumulated risks come under better control. Is it a good thing? It depends on how you look at it. At the national level, the economy goes like clockwork. At the corporate level, however, the cost and the challenges of the slowdown become visible.

Isn’t it always like this? It always hurts when you shift from one phase to another. Have you ever wondered what the meaning of the fall from 9 percent to 3 percent growth is? As this is exactly what has been happening in Turkey today, let’s ponder this.

Anatolian tradesmen and industrialists feel the economic slowdown the most. How? With the doubling of the value of bounced checks from 2011 to 2012, for one thing. As the economy slows down, the cost of doing business escalates for some. The businesses that you take for granted start to operate with difficulty. When they face difficulties, so do banks. The slowdown in the economic growth threatens businesses in full flood. Thanks to the Banking Regulation and Supervision Agency, banks initiated precautions in 2008 in order to minimize the impacts of the global crisis on the Turkish economy. Currently we are at the dawn of a period that requires all of us to be on alert. Let me note it on this occasion.

Comparing the second and the third quarters of 2011 and 2012, the total value of bounced checks doubled. Also the total value of protested bills  increased by 50 percent and nonperforming loans of banks escalated alike. At first, the rise in the value of bounced checks was seen as a result of the abolition of imprisonment for the crime.

The aim was to lower the penal sanction and the workload of courts. Yet, according to the notifications by courts to the Central Bank in October, the number of injunctions declared increased by 790 percent to 36,000 compared to the same period last year. This indicates that the content of the workload, not the workload per se, has changed since the abolition. Though we tend to see the results as limited and isolated incidences. A visible trend started to develop by the second half of 2012. As the Turkish economy shifted to a path of slower growth, cases of payment difficulty gained prevalence.

Businesses have been trying to get used to declining profit margins as well as the dynamics of the slow growth following rapid growth. They are learning the hard way that they have to be more cautious when choosing trade partners. They are observing that in the current era, operating in the formal economy will increasingly become a must. Transformation in the corporate sector cannot be done forcibly by enacting legal obligations or by planning on paper. It takes place spontaneously in the course of life.

Is it possible that the process will turn around and the Turkish economy return to the high-growth path immediately? No. Can we expect that the public measures counteract with the voluntary restructuring process that is not based on legal obligations? No.

Currently, we are in a period in which the corporate restructuring that the Turkish Commercial Code seeks to accomplish takes place voluntarily.

This commentary was published in Radikal daily on 14.11.2012