Fitch upgrades Turkey to investment level.

By bne IntelliNews November 6, 2012
Fitch said on Monday that it upgraded Turkeys Long-term foreign currency Issuer Default Rating (IDR) to 'BBB-' from 'BB+' and the Long-term local currency IDR to 'BBB' from 'BB+'. The outlooks on the Long-term ratings are Stable. Fitch also upgraded Turkeys short-term foreign currency IDR to 'F3' from 'B' and the Country Ceiling to 'BBB' from 'BBB-'. The upgrade to investment grade reflects a combination of an easing in near-term macro-financial risks as the economy heads for a soft landing and underlying credit strengths including a moderate and declining government debt burden, a sound banking system, favourable medium-term growth prospects and a relatively wealthy and diverse economy, Fitch said in a statement. The rating agency believes that the Turkish economy is on track to return to a sustainable growth rate, having narrowed the current account deficit and lowered inflation after overheating in 2011. Fitch forecasts GDP growth of 3% in 2012, 3.8% in 2013 and 4.5% in 2014. Fitch expects the Turkish economy to remain more volatile than investment grade peers, but believes sovereign creditworthiness has become more resilient to shocks. At some point, an external financing shock and a recession are likely, however, the country's strong sovereign, bank and household balance sheets, and economic and exchange rate flexibility provide important buffers against shocks spreading into a wider financial crisis, Fitch explained. Fitch expects the current account deficit to decline to USD 58bn (7.3% of GDP) in 2012, down from USD 77bn (10%) in 2011. Fitch also said that the main factors that could lead to positive rating action, individually or collectively are; a material and durable reduction in the current account deficit, though Fitch does not anticipate this in the near term and track record of lower and more stable inflation. The main risk factors that could lead to negative rating action, individually or collectively, are; a balance-of-payments crisis triggered by an external shock or a domestic policy mistake, a worse-than-expected increase in external debt ratios over the medium term, for example related to rapid credit growth and larger current account deficits and a major political shock with a material adverse impact on the economic and fiscal outlook, Fitch said. Deputy PM Ali Babacan and finance minister Mehmet Simsek hailed Fitchs decision. Turkey expects upgrade from other rating agencies shortly, Babacan said while Simsek noted that rating upgrades generally lead to portfolio and FDI inflows in the amount of 4% of GDP in the respective country in the two years following the rating upgrade.

Fitch upgrades Turkey to investment level.

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