Weaker growth challenges Turkey’s sovereign credit profile

ISTANBUL

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A weaker growth environment than in recent years is challenging Turkey’s sovereign credit profile, while its exposure to volatile foreign capital flows has been heightened by regional political risks and domestic policy uncertainty, Moody’s said on Nov. 4 in a written statement. 

The rating agency said Turkey’s government finances were strong in credit, but were likely to be adversely affected by slower growth and fragile investor confidence.

“External vulnerabilities keep weighing on the credit profiles of Turkey’s sovereign, its banking and its corporates,” Moody’s, which currently has a Baa3 rating on Turkey with a negative outlook, said in the report.

It said Turkish companies would be particularly hard hit by slower growth, while a reduction of capital inflows would reduce their access to funding. It also suggested that inflation and geopolitical risks would dampen consumer and investor sentiment.

Turkey is struggling to control higher inflation, which is well above the Central Bank’s year-end target of 5 percent. Economic growth, meanwhile, is also faltering.

Moody's is expected to hold a meeting in Istanbul on Nov. 5 to discuss the Turkish economy’s future potential and challenges.