S&P keeps Turkey credit rating unchanged

ISTANBUL

The Standard & Poor’s (S&P) ratings agency kept Turkey’s credit rating unchanged on May 5, declaring that its outlook remained “negative.”

Turkey’s foreign currency credit rating held steady at BB, while its local currency credit rating was also preserved at BB+.

Ratings on the country are supported by the government’s low debt burden, the agency said in a statement.

Turkey’s current account deficit, however, and its high external financing needs constrain the country’s credit ratings, “because they make economic growth vulnerable to external refinancing risks,” the statement said.

S&P warned that the high use of the U.S. dollar, especially in Turkey’s corporate sector, limited the benefits of a weaker Turkish Lira to the economy.

The “negative” outlook, on the other hand, is a result of the possibility that weak economic growth and volatility in the exchange rate could lead to pressures on inflation, according to the agency. 

“We could revise the outlook to stable if Turkey’s fiscal position remained in line with a moderating government debt-to-GDP ratio and inflationary pressures abate, likely reflecting a stabilization in the lira exchange rate and a gradually improving external and domestic growth scenario,” the statement said. 

The agency said economic growth through 2020 is expected to be supported by fiscal stimulus, tax breaks and consumer spending. “Consumption will remain the main growth driver,” it added.

S&P forecast the Turkish economy to grow by 2.6 percent this year and 2.8 percent next year. The economy is forecast to expand by 3 percent in each of 2019 and 2020.