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Growth wave pressures Turkey's banks

If the recent sparkling performance from Turkey's economy persists, the country's banks will be under increasing pressure to wean themselves off dependence on revenues from government borrowing and seek economies of scale through mergers and acquisitions.

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RECENT DATA INDICATE that Turkey has maintained a surprisingly good economic performance throughout the year. "It's the first time in my 18 years in banking that I have seen such figures," says Naci Sigin, general manager of Yapi Kredi Bank.

The 0.1% monthly rise in the September wholesale price index was the lowest in the past three decades, bringing the annual inflation rate down to 19%, compared with 92% in January 2002. The year-on-year increase in the consumer price index was brought down to 23% in September, compared with 73.2% at the beginning of 2002. Inflation may have fallen to a permanently lower level. Real GDP was up 5.8% in the first half of 2003, making Turkey one of the world's fastest-growing economies.

"The positive news flow that we had expected is coming through quicker than we had factored," says Lehman Brothers analyst Tolga Ediz.

The IMF's periodic review of the economy, usually a stormy affair, has gone well, with the Fund agreeing terms for the 2004 budget. The timetable for ending the review at the end of October was met, an unusual, not to say unique, occurrence for Turkey.

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