EURODIALOGUE
Journal of International Relations, European, Economic and Social Studies
fund investments, are heavily engaged in making what seems to be high risk consumer loans for short term profits. Domestic loan expansion can be traced on Table 3, below. Forty percent of consumer credits appear to be in the form of overdrafts. This type of banking activity also fails to provide required services for furthering OFDI in Turkey. If the banking sector is not geared up and organized to serve the long term needs of the corporate sector it would not only end up destabilizing short term economic performance, but it would also undermine the transformation of the economy.
Table 3: Banking Sector Domestic Loans, (CBRT)
There are further indicators that need scrutiny in order to establish the healthiness of the Turkish banking system. For instance, foreign direct investment has declined sharply. In the beginning of 2009 capital outflow was tremendous. Current account deficit was estimated to increase at unprecedented levels from nearly $50bn. in 2010 to nearly $70bn. in 2011, at year-end, or 8% of the GDP. The problem of sustaining high growth rates lurks throughout short term funding of the current account deficit. The financing of this deficit has become dependent on short term capital flows. For instance in 2008, the government announced a tax amnesty for Turks holding wealth abroad and promised that “no questions will be asked about the origin of their funds� if they wish to repatriate them. In two years, nearly Turkey on the European doorstep
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