Moody’s says Turkey has strong economic basis

As global markets suffer due to concerns regarding China’s slowdown, US Federal Reserve’s potential rate hike, credit rating agency Moody’s draws attention to Turkey’s economic strength

Photo by: AP
Photo by: AP

Turkish President Recep Tayyip Erdogan, right, is seen in an election billboard of his Justice and Development Party with Haghia Sophia in the background in Istanbu, Turkey, March 27, 2014

Economic  strengths support Turkey's "Baa3" credit rating, Moody's analyst Alpona Banerji told Anadolu Agency on Wednesday.

"Turkey’s 'Baa3' rating incorporates credit strengths like its relatively resilient fiscal framework, and modest government debt levels that allow for flexible policy responses," Banerji said.

"Turkey’s creditworthiness remains supported by its favorable public finance metrics with the government’s own borrowing requirements relatively low at 6 percent of GDP this year," he commented.

"We expect the impact of low oil prices and lower domestic demand on imports to offset the adverse impact of slowing exports in 2015, and that the current account deficit will fall further to 4.7 percent of GDP (estimated at $37 billion) by year-end, from 5.8 percent of GDP in 2014.

Banerji explained that Moody’s base case scenario keeps the rating at "Baa3," (investment grade). "This is supported by its fiscal strength, low debt levels and economic strengths such as being a large middle income country."

Banerji pointed out, however, that Moody's outlook was negative. "Our outlook reflects a combination of challenges like the ongoing political uncertainty, pressures on external financing and the prospect of weaker medium-term growth that the country faces. In particular, we expect capital inflows to remain under pressure and the incoming government’s success in implementing reforms that enhance growth and attract capital will be an important influence on the country's credit quality," he added.