Turkey : Credit and construction warning from IMF: End never ends well

Examining the periods of economic growth and contraction in developed and developing countries in the 1970-2014 period, IMF experts warn that economic performance has improved but the risk of crisis has increased for a while with this model based on credit boom and growth in the construction sector.

The construction sector, which grew rapidly during this period, and construction employment are also shrinking rapidly during the crisis.

Reminding that the ratio of the volume of private sector loans to national income doubled in Spain in the period of 2000-2007, and the housing prices in this period doubled in real terms, experts pointed out that the economy also grew at a record level in this period. In this period, while total employment increased by 27 percent, employment in construction was at an extraordinary rate of 47 percent.


However, when the credit bubble burst in 2008, bad loans increased in this country and bank failures occurred. Spain then suffered a long-term economic slowdown.

Experts stated that the combination of rapid credit growth and rapid growth in the construction industry and the rapid collapses following this process are not only specific to Spain and a period, but emphasized that similar results occurred in many countries and in many periods.

Many experts in the 2018-2019 period as a result of the economic crisis in Turkey, construction and had pointed out the economic model based on loan growth.