Moody’s: Negative outlook for Turkish, GCC and South African companies in 2017

DUBAI

Low economic growth, weak consumer and business confidence, and foreign exchange volatility will keep the overall outlook for Turkish, Middle Eastern and South African non-financial corporates in 2017 negative, Moody’s Investors Service said in a report on Dec. 15. However, some investment grade rated companies, including some in Turkey, will remain resilient, it added. 

Moody’s report, titled “Non-Financial Corporates - Middle East, Turkey and South Africa: 2017 Outlook - Negative on Weak Growth and Challenging Operating Conditions,” is part of a series of 2017 Credit Outlooks that provide insight into next year’s credit conditions across all sectors, Moody’s stated. 

“Our overall negative outlook for Turkish, Middle Eastern and South African companies in 2017 is driven by weak consumer and investor confidence, continuing currency volatility and varying geopolitical risks. However, some corporates including Turkish investment grade rated names remain relatively resilient to domestic economic slowdown by virtue of their market leadership positions, strong balance sheets, healthy liquidity and manageable FX exposure,” said Rehan Akbar, a Moody’s Assistant Vice President, the analyst and author of the report. 

Nearly half of Turkish corporations have ratings above Turkey’s Ba1 sovereign rating and maintain very conservative financial profiles and have a degree of resilience against a domestic economic slowdown, stated Moody’s. 

“Ratings of most Turkish corporates did not change as a result of the sovereign rating downgrade in 2016 because of their market leadership positions, strong balance sheets, healthy liquidity and manageable FX exposure,” it added. 

Gulf Cooperation Council (GCC) companies, particularly those in oil and gas and oilfield services, are being hurt by low oil prices, which are limiting growth prospects in the region and reducing companies’ financial buffers, the report stated. 

Liquidity is also tightening, but should remain manageable for large corporates, it added. 

In South Africa, companies are expected to be hit by the low growth environment with Moody’s GDP growth expectations of 1.1 percent for 2017 amid political uncertainty, weak consumer consumption, low capital investment spending, and rand volatility. 

“However, rated companies generally are geographically diversified so their exposure is not limited to South Africa, and they have healthy balance sheets with manageable liquidity positions to weather the macro environment,” added Moody’s.