Turkey has good growth prospects compared with BRICs: Fitch

ANKARA – Anadolu Agency

Turkey is a large emerging market with good growth prospects relative to most of the BRICs, the senior director of global rating agency Fitch Ratings has said.

Speaking to Anadolu Agency Feb. 16, Fitch Ratings Senior Director Paul Rawkins said the risks lie mostly on the external side for the country.

“Turkey’s still large gross external financing requirement makes it vulnerable to shifting investor sentiment. Geopolitical risks are also a concern,” Rawkins said.

“Political risk has long been a drag on Turkey’s sovereign credit rating and Fitch foresees little prospect of it diminishing over the medium term,” he said.

Fitch perceives policy coherence and credibility to be weaker in Turkey than rating peers, chiefly because its monetary policy is unpredictable, Rawkins said.

He added any erosion of policy coherence and credibility that heightens Turkey’s exposure to fluctuations in global risk appetite for emerging market assets would be viewed negatively.

“There are many competing factors here: on the one hand a weaker Turkish Lira enhances the competitiveness of Turkish exports; on the other, it feeds through to domestic inflation quite quickly,” he said.

Rawkins said a weaker exchange rate also affects the corporate sector adversely.

“The corporate sector in the country is heavily exposed to forex fluctuations, raising the cost of debt service and putting a brake on new investment,” he added.

Fitch’s forecasts for Turkey’s average annual inflation, which was at 7.24 percent in January, for 2015 and 2016 are 6.5 percent and 5.5 percent respectively.

In December 2014, Fitch Ratings increased Turkey’s economic growth forecast for 2015 to 3 percent.
The rating agency left the country’s credit rating unchanged at BBB- in its last evaluation in October 2014.

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