S&P says uncertainty in Turkey likely to persist for few months

ISTANBUL

Ratings agency Standard & Poor’s said June 18 that it expected uncertainty to persist in Turkey over the next few months and that it would remain high until the year’s end in the event of a snap election, which could potentially hamper growth.

“If a coalition was formed, the policy predictability would partly depend on key cabinet appointments. Even if the Justice and Development Party (AKP) does it alone, its reliance on outside support to pass legislation will surely have implications for what it can pass through parliament and at what speed. As we understand it, if a government is not formed within 45 days of the speaker’s appointment, early elections would likely be held in November this year,” the S&P said in the statement. 

“Under this scenario, we believe political uncertainty would remain heightened until the end of the year, which could potentially hamper growth if business investments are postponed,” it added. 

In a note on the credit implications of a general election earlier this month, S&P said the outcome could reduce pressure on the judiciary, the financial regulator and central bank, therefore, potentially improving policy predictability.

But it said it could consider a Turkish downgrade if developments such as lira volatility, consumer confidence and inflation were to weaken fiscal performance and debt metrics were to deviate from current expectations.