(Bloomberg) --

Turkey unveiled its most expansive credit incentive scheme in four years to help the economy recover from the coronavirus slump.

The nation’s three largest state-owned banks will begin offering mortgages, loans for used cars, credit for home appliances, holiday packages and other products at annual interest rates running below inflation, they said in a joint statement on Monday.

The announcement underscores policy makers’ determination to get credit -- already growing at a record pace -- flowing through Turkey’s $750 billion economy, with the government relying on extending loans to businesses and households rather than cash injections that would worsen the fiscal outlook.

It also supplements the banking regulator’s latest requirements intended to force private banks to lend more aggressively, according to Onur Ilgen, an Istanbul-based treasury manager at MUFG Bank Turkey AS.

“We expect the latest package announced by state lenders to support growth in tourism, automotive and construction from the third quarter,” Ilgen said. In the absence of a second wave of coronavirus infections in Europe and Turkey “there is a chance that full-year economic growth turns positive” he said.

TC Ziraat Bankasi AS, Turkiye Vakiflar Bankasi and Turkiye Halk Bankasi AS said in a joint statement that they would start offering 15-year mortgages with monthly interest rates as low as 0.64%, or under 8% annual. Inflation is running at around 11%.

Similar rates and grace periods of as much as a year are on offer for loans to purchase cars and home appliances made in Turkey, they said.

Turkish stocks rallied after the news with the Borsa Istanbul benchmark index rising as much as 1.5%. It was up 1.1% at 11:31 a.m. in Istanbul while the 12-member banking index was trading 1.2% higher.

Last week, banking regulator BDDK tweaked its so-called asset ratio formula to force banks to lend more to businesses by closing loopholes that allowed them cut deposit rates instead.

Annual credit expansion exceeded 70% during the 13 weeks through May 20, the fastest pace since at least 2007, according to latest official data. Commercial loans more than doubled and retail loans rose by about 45% during the same period.

Turkey’s economy grew 4.5% in the first quarter thanks to a surge in government spending and household consumption, before measures to slow the spread of the coronavirus kicked in mid-March. Turkey began easing virus measures last week as infection rates have stabilized at their lowest level since the outbreak began more than two months ago.

Gross domestic product is expected to shrink 3.6% in 2020, according to a Bloomberg survey last month.

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