Low oil prices ‘pleasant surprise’ for Turkey’s inflation

ANKARA - Anadolu Agency

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Falling oil prices have proven to be a pleasant surprise for Turkey in helping to narrow the current account deficit, said the senior director of global rating agency Fitch Ratings.

Speaking to The Anadolu Agency yesterday, Fitch Ratings Senior Director Paul Rawkins said declining oil prices have lowered 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.

“Despite the positive effects of low oil prices, Fitch continues to forecast growth in the region of 3 to 4 percent over 2015-2016, pending greater commitment to structural reforms,” he said. 

The Turkish Lira has lost record value against the dollar and is likely to remain one of the more volatile emerging market currencies, Rawkins said. He added the lira remains weak and volatile while putting upward pressure on prices.

The lira is to remain unstable “due to its still large current account deficit and gross external financing requirement, which leaves it vulnerable to shifting investor sentiment,” he said.

Despite the rising anticipation of interest rate cuts by Turkey’s Central Bank, Rawkins said their stance on monetary policy remains unchanged.

 “We perceive policy coherence and credibility in Turkey as weaker than its rating peers because of the unpredictability of its monetary policy,” he added.

In December 2014, Fitch Ratings increased Turkey’s economic growth prediction for 2015 to 3 percent, while anticipating 8.2 percent inflation by the end of 2014, 7 percent for 2015 and 5.8 percent for 2016.

The rating agency had left the country’s credit rating unchanged at BBB- in its last evaluation in October.

The next planned assessment of the country’s credit rating and outlook is on March 20 and Sept. 18.