Moody’s says Turkey’s early elections prolong policy indecision, intensify economic headwinds

ISTANBUL - Reuters

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Turkey’s snap parliamentary election being held on Nov. 1 will prolong policy indecision and intensify economic headwinds, ratings agency Moody’s said on Aug. 27.

In the report, the rating agency said geopolitical risks have been escalating and investors have avoided the risks arising from emerging markets. 

“The lack of any political moves will trigger a foreign shock that will pave the way to financial instabilities,” said the report. 

Moody’s, which is expected to make the next credit note assessment in December, said the November elections will not resolve the political problems in the country. 

“Although there are differences in estimates, all public polls have forecasted that any political party will not able to take votes in required numbers to establish a single-party government. The establishment of a minority government or coalition government will more likely be the case, paving the way for political instability by nature,” said the rating agency. 

The report has also said the election government will have little appetite to make economic reforms. 

Saying the GDP growth rate is expected to decrease to 2.5 percent by the end of this year from 2.9 percent in the previous year, Moody’s added: “Unless a powerful government is established in the November elections, Turkey’s capacity to fuel and maintain investor sentiment will be affected, creating pressure over Turkey’s creditworthiness.”