Fitch Says Sees Little Progress in Turkey
World Economy

Fitch Says Sees Little Progress in Turkey

Turkey is a large emerging market with good growth prospects relative to most of the BRICS (Brazil, Russia, India, China, South Africa), said the senior director of global rating agency Fitch Ratings.
Speaking to The Anadolu Agency, Fitch Ratings Senior Director Paul Rawkins said the risks lie mostly on the external side for the country.
“Turkey’s still large gross external financing requirement makes it vulnerable to shifting investor sentiment. Geopolitical risks are also a concern,” Rawkins said.
“Political risk has long been a drag on Turkey’s sovereign credit rating and Fitch foresees little prospect of it diminishing over the medium term,” he said.
Fitch perceives policy coherence and credibility to be weaker in Turkey than rating peers, chiefly because monetary policy is unpredictable, Rawkins said.
He added any erosion of policy coherence and credibility that heightens Turkey’s exposure to fluctuations in global risk appetite for emerging market assets would be viewed negatively.
“There are many competing factors here: on the one hand a weaker TL enhances the competitiveness of Turkish exports; on the other, it feeds through to domestic inflation quite quickly,” he said.
Rawkins said a weaker exchange rate also affects the corporate sector adversely.
“The corporate sector in the country is heavily exposed to forex fluctuations, raising the cost of debt service and putting a brake on new investment,” he added.
Fitch’s forecasts for Turkey’s average annual inflation, which was at 7.24 percent in January of the year, for in 2015 and 2016 are 6.5 percent and 5.5 percent respectively.
In December 2014, Fitch Ratings increased Turkey’s economic growth forecast for 2015 to 3 percent.
The rating agency left the country’s credit rating unchanged at BBB- in its last evaluation in October of last year.
The next planned assessment of the country’s credit rating and outlook is on March 20 and September 18.
In early February, Rawkins said that declining oil prices have narrowed Turkey’s current account deficit as well as compressed inflation.
“Falling oil prices have improved the inflation outlook for Turkey, but they should not be considered a one-way bet,” Rawkins said.
Fitch continues to forecast growth in the region of 3 to 4 percent over 2015-2016, pending greater commitment to structural reforms,” he added.


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