Turkey rating unlikely to benefit from oil price decline: S&P

LONDON - Reuters

The sharp fall in oil prices is unlikely to benefit Turkey’s sovereign rating in the coming year, Standard and Poor’s said on Feb. 2, as it pointed to other pressures on the country.

S&P’s Turkey BB+ ‘junk’ rating has a negative outlook. As a major oil importer, the fall in crude prices has benefited the government’s finances but trade with oil producing countries has also dropped as their economies slow.

“In January-November 2015, exports to Turkey’s largest oil-producing export markets (Iraq, UAE, Russia, Iran, Saudi Arabia, Azerbaijan, and Algeria; together accounting for 20 percent of total exports in U.S. dollar terms) were 15 percent lower than in 2014,” S&P said in a new report.

It said there were other pressures too.

“We believe that the potential crystallization of contingent liabilities on to the government’s balance sheet, financial instability, pressure on the balance of payments, and lower growth could all potentially cause a larger deterioration in the fiscal position than we currently project.”

“Moreover, the ratings could come under pressure, if we were to believe that key institutions were unable to fulfil their mandate effectively as a result of political intervention, and this in turn could lead to worse macroeconomic outcomes.”

“On the other hand, if we saw economic rebalancing and the reliance on external borrowing reducing, we could revise the outlook to stable.”