Fitch praises peace process like Moody’s

ISTANBUL - Anatolia News Agency

Turkey’s progress toward peace in Kurdish issue has boosted confidence in international markets and will lead to new investments, Fitch says. REUTERS photo

Turkey’s peace process with outlawed Kurdish militants has spurred confidence in international markets as Fitch Ratings’ chief analyst said the process would boost investments and accelerate growth.

“If Turkey can prove this process is sustainable, it will enhance Turkey’s stability and enable investments to surge and growth to accelerate,” said Ed Parker, chief analyst of Fitch ratings, which is the only rating agency to fix Turkey’s credit note at investment grade.

The process will build up the country’s credibility in the middle term, he said.

His remarks came one week after another rating agency, Moody’s, said “the prospect of peace promises to boost investor confidence and improve southeastern Turkey’s attractiveness as a destination for foreign direct investment.”

Current deficit remains key issue

Parker also touched upon Turkey’s recently announced February current account deficit of $5.1 billion, saying the current deficit remains a key issue despite the ratings upgrade to BBB-, which was made last November. Fitch expects Turkey’s current account deficit-to-GDP ratio to rise 7 percent by 2014, he said.

The agency also forecasts 2013 growth to come in at 3.8 percent and 2014 growth to be 5 percent. Turkey grew by only 2.2 percent in 2012, after an impressive 8.8 percent in 2011.

Despite promises of growth in the Turkish economy amid worldwide recession trends, it still lags behind countries with the same investment grade, the Turkey director of Fitch Ratings, Gülcan Üstay, said last month.

In January, Moody’s said Turkey needed to improve its resilience to external shocks by narrowing its current account deficit or boosting foreign reserves.

Standard & Poor’s raised Turkey to within a whisker of investment grade on March 27, citing a rebalancing economy and progress in the Kurdish peace process. Standard & Poor’s said in January it would no longer offer a full rating service for Turkey due to a spat between the agency and Turkish government.