Fitch cuts Turkey 2018 GDP growth forecast to 3.9 pct

LONDON - Reuters

Fitch Ratings has cut its forecast for Turkish gross domestic product (GDP) growth in 2018 to 3.9 percent from 4.1 percent, the ratings agency said on Nov. 23.

“Our forecast is 3.9 percent reflecting some easing of government stimulus measures,” said Paul Gamble, head of emerging Europe sovereigns at Fitch Ratings, speaking at a Fitch conference in London.

Fitch currently rates Turkey as BB+ with a stable outlook. Gamble added that politics was the factor that would exert the greatest influence on economic performance and the sovereign credit profile in 2018 in the run up to the 2019 elections.

Zarrab case in US

Investigations by U.S. authorities into a group of Turkish traders and bankers accused to helping Iran evade sanctions could put Turkish banks’ ratings under pressure if the situation escalates, Fitch also said.

“Given the noise around the U.S. investigations, if there was a case of reputational damage resulting in diminished access to market or a large fine that wasn’t offset by state support, it could result in negative rating pressure,” said Lindsey Liddell, Fitch’s director of financial institutions.

U.S. prosecutors have charged Turkish gold trader, Reza Zarrab, and his alleged co-conspirators of handling hundreds of millions of dollars for Iran’s government and Iranian entities from 2010 to 2015, in a scheme to evade U.S. sanctions.

Nine people have been criminally charged, but only Zarrab and a banker from Turkey’s Halkbank, Mehmet Hakan Atilla, are in U.S. custody. Both deny the charges.

Liddell added that capital buffers in the Turkish banking sector were currently “sufficient to absorb moderate shocks.”

“However, risks to bank capitalization remain in the event of further lira devaluation or higher than expected non-performing loan growth.”