Daily Sabah – Turkey kept its sovereign rating at investment grade in the wake of the review of Fitch Ratings on August 19. The agency affirmed Turkey’s Long-Term Foreign and Local Currency Issuer Default Ratings at BBB-, while revising its outlook to negative from stable.
Despite raising concerns on economic performance, Fitch said that it does not expect the fiscal stance to weaken in response to the coup attempt. Referring to the solid fiscal performance during the first half of 2016, Fitch pointed out that in spite of the spending commitments made during the late-2015 election, the central government primary surplus was 1.3 percent of projected full year GDP for the first two quarters of 2016. Moreover, Fitch is forecasting Turkey’s debt/GDP ratio to fall to 32.2 percent by the end of 2016, which puts the country ahead of many of its peers, where the median ratio is 40.2 percent.
Citing that Turkey’s current account deficit has continued to narrow due to lower oil prices, Fitch is projecting it to realize at 4.3 percent of GDP in 2016. Fitch’s report also pointed out that average inflation has fallen so far in 2016, with core inflation at 8.7 percent in July. Focusing on the fact that the banking sector functioned well and that deposit outflows were kept at minimum in the wake of the coup attempt, Fitch said that a more stable domestic security environment and implementation of structural reforms could lead to a revision of the outlook to stable. The agency also assumed that commitment to fiscal stability will continue and that the economic relations of Turkey with key trading partners will not deteriorate in the forthcoming period.
Moody’s, the last of the big three ratings issuers to release a report following the foiled coup, previously announced on August 5 that its review on Turkey’s Baa3 rating remains ongoing and will be released within 90 days of July 18.