Moody’s: Political turbulence, market volatility heightens Turkey’s external vulnerability.

By bne IntelliNews March 25, 2014

Political turbulence and market volatility heightens Turkey’s external vulnerability while large external imbalances render the Turkish economy vulnerable to a decline in foreign capital inflows, Moody’s said on Tuesday.

The effects of market volatility associated with QE tapering have been amplified by domestic political turbulence, heightening Turkey’s external vulnerability, Moody’s stressed. The maturity structure of the country’s external debt, a third of which is short-term, and dependence on the mostly short-term nature of capital inflows could potentially heighten the risk of a hard landing, the rating agency said.

However, the government’s own balance sheet remains a credit support, and fiscal policy is expected to able to absorb some of the shocks to the economy, according to Moody’s. The absolute amount of foreign-currency debt is relatively low at 13% of GDP, and the sensitivity of the government’s debt to possible changes in interest rates is being reduced via ongoing efforts to lengthen its domestic and external debt profile to average maturities, Moody’s noted. Moody’s rates Turkey at Baa3/stable.

Related Articles

Poland supports Turkey’s near-dead EU membership bid

Turkish President Recep Tayyip Erdogan received a warm welcome from his Polish peer Andrzej Duda on October 17, as Warsaw said it supported Ankara’s formally ongoing bid to become a member of the ... more

Poland claims there will be “no taboo” in talks with Erdogan

Poland will skip no touchy topics in talks with President Recep Tayyip Erdogan, visiting Warsaw on October 17, the office of President Andrzej Duda said ahead of the visit by the Turkish leader, ... more

Erdogan says he plans talks with lenders on cutting Turkish interest rates

Turkey's President Recep Tayyip Erdogan said on October 13 that he plans to hold talks with both public and private lenders on how to lower interest rates. He did not say, however, when those ... more