Fitch triggers hopes for Turkey upgrades by Moody’s and S&P

ANKARA - Hürriyet Daily News

Moody’s puts forth three conditions for a Turkish rating upgrade: 1. Reduction of the structural part of the current account deficit. 2. Reduction of the private sector external debt.3. Further increase in foreign exchange reserves. REUTERS photo

The announcement about an upcoming Moody’s meeting in Istanbul has raised further hopes for a rating upgrade for Turkey as a number of economists have forecasted that international rating agencies will follow rival Fitch in its upgrade.

Fitch’s historic Turkey upgrade to “BBB-,” which is the lowest investment-grade level, came only three days before Moody’s Istanbul meeting scheduled for tomorrow.

Moody’s said on its website that it will hold its sixth Annual Credit Risks Conference in Turkey on Nov. 21.

Moody’s Europe, the Middle East and Africa relations executive Andreas Naumann will attend the meeting, where senior analyst Sarah Carlson will make a presentation on European risks, Turkey and the eurozone.

Moody’s signaled in an Oct. 30 report that it might consider upgrading Turkey, putting forth conditions. Turkey is one notch below investment grade on Moody’s scale. Its Standard & Poor’s grade is two notches below.

Commenting on the Fitch upgrade, which was appreciated by both the government and the market, Nordea Bank economist Aurelija Augulyte said the market was now pricing a possible move by Moody’s and S&P, the remaining large agencies. “I think that this will happen for sure,” Anatolia news agency quoted Augulyte as saying. The next three months were crucial for these two agencies’ decision on Turkey, she said.

Fitch’s upgrade was not a surprise, Capital Economics economist William Jackson told Anatolia, praising the Turkish banking sector. This will attract international investment funds, he also said. Toronto-Dominion securities economist Cristian Maggio agreed that Fitch will trigger the other agencies: “We expect the first upgrade from Moody’s.”

Garanti Investment research director Özgür Yurtdaşseven said yesterday that he forecasted the Istanbul Stock Exchange (İMKB), which saw a historic high yesterday, would increase to 74,460 points by the yearend and 85,314 in 2013 with a 17 percent increase.

Politicians debate over Fitch upgrade

Fitch’s move also triggered a fresh war of words between Prime Minister Recep Tayyip Erdoğan and main opposition Republican People’s Party (CHP) leader Kemal Kılıçdaroğlu.

Erdoğan said during his party’s parliamentary group meeting yesterday that Kılıçdaroğlu’s criticism on the Turkish economy only hours before the Fitch upgrade was unlucky.

Kılıçdaroğlu said at a meeting with economy journalists the morning of Nov. 5 that the government was missing all of its crucial economic targets The upgrade strengthened Turkey’s hand in loan rates and was encouraging for international capital flows, the prime minister said.

“Whenever Kılıçdaroğlu denigrates the government, praises for Turkey come from [around] the world. How can a main opposition party be such a stranger and so careless to his country?” he asked.
The Fitch report was full of disgrace for an independent and democratic country, Kılıçdaroğlu responded in his parliamentary group speech.

The report said a military intervention in Syria would be cause for a downgrade.

“The report says do not intervene in Syria or we will cut your grade,” Kılıçdaroğlu said.

A country that binds it future to hot inflow faces such reports, which is the real danger, he said. Money laundering and financing terror were the other risks mentioned in the report, and the absence of a counteracting law on these issues was another reason for downgrade, he said.