Fitch affirms Turkey’s ratings, outlooks stable

By bne IntelliNews February 29, 2016

Fitch on February 26 affirmed Turkey's Long-term foreign and local currency Issuer Default Ratings at 'BBB-' and 'BBB', respectively, in a widely expected move. The outlooks are stable.

The “BBB-” is the lowest investment grade.

Fiscal discipline remained in place last year despite two parliamentary elections, the rating agency said in a statement. “The implementation of pre-election spending commitments is expected to worsen the fiscal position in 2016, with the central government deficit expected to widen to 2% of GDP, but debt/GDP will remain on a downward path,” the rating agency said, adding that refugee and security expenses pose expenditure pressures.

Fitch also warned that the geopolitical scene has worsened and external vulnerabilities are a key credit weakness. “Turkey's involvement in the conflict in neighbouring Syria and the breakdown of the Kurdish peace process appear to have triggered several high-profile terrorist attacks claiming multiple fatalities.”

Fitch expects Turkey’s current account deficit to shrink to a seven-year low of 3.5% of the country’s GDP at the end of 2016,.

The rating agency forecasts “a slight moderation” in growth to around 3.5% in 2016. Growth will be consumption-driven, reflecting the hike in the minimum wage, lower oil prices and a fairly loose policy stance, according to Fitch. It argues that the impact of Russian sanctions will be gradually offset by deeper economic relations with Iran and a modest strengthening of the Eurozone.

Fitch assumes that pressure from recent currency depreciation and the minimum wage hike will push inflation into double digits during 2016.

A materialisation of stress stemming from external financing vulnerabilities, prolonged and deepened political stability as well as insecurity and geopolitical stress could trigger negative rating action, Fitch warned.

But, conversely, it said, implementation of structural reforms that deliver higher gross domestic savings, a more flexible labour market and greater foreign direct investment to help address external imbalances could result in positive rating action. Fitch also mentioned a more stable and predictable domestic political and security environment and a more coherent and predictable monetary framework as factors that could trigger positive rating action.

 

Related Articles

Gulen hits out at Erdogan in Washington Post as Turkish leader arrives for Trump talks

Fethullah Gulen, the exiled cleric accused by the Turkish government of orchestrating last year’s attempted coup, on May 16 accused President Recep Tayyip Erdogan of “doing everything he can ... more

Police detain 53 Istanbul bourse ex-employees citing Gulen claims

Turkish prosecutors have ordered the detention of 102 former Borsa Istanbul stock exchange employees, with 53 arrested already, local media reports suggested on May 12. The employees had ... more

EBRD cuts 2017 growth forecast for Turkey to 2.6% from 2016's 2.9%

GDP growth in Turkey is now projected to moderate to 2.6% in 2017 from 2.9% in 2016, reflecting increased capital ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss