Negative outlook persists for Turkish companies: Moody’s

DUBAI

The outlook for non-financial firms both in Turkey and South Africa remains negative for the coming 12 to 18 months, Moody’s Investors Service said Dec. 13 in its annual report titled “Non-financial corporates - Middle East, Turkey and South Africa: 2019 Outlook.”

“While the outlooks for companies in Turkey, South Africa and Gulf Cooperation Countries remain unchanged versus last year, the diverging regional trends will continue into 2019,” said Rehan Akbar, Moody’s vice president.

Moody’s cited high foreign exchange volatility, tighter financial conditions, and the limited clarity on policy direction as the key drivers of the negative outlooks for Turkish companies.

The impact of these factors is compounded by Moody’s expectation of economic contraction in 2019, it added.

According to the ratings company, Turkey is forecast to face a 2 percent contraction in real GDP in 2019 followed by a moderate 3 percent recovery in 2020.

“Economic contraction in 2019 will create further challenges for the majority of businesses as they will continue to be constrained by either a lack of access to credit or unaffordable credit,” it said.

Moody’s also argued that high inflation, forecast at 18 percent in 2019, and persistent FX volatility will weigh further on investor and business confidence.

It also suggested that export-oriented manufacturing companies or companies that have the flexibility to shift to exports when domestic demand declines are better positioned to face challenges, supported by a more competitive lira.

“Tighter financial conditions in Turkey will be compounded by gradual tightening of monetary policy in advanced economies, a key risk for corporates’ access to funding,” Moody’s warned.