Fitch affirms Turkey’s rating, outlook
ISTANBUL - ReutersFitch Ratings affirmed Turkey’s sovereign rating at BBB-, the lowest investment grade rating, with a stable outlook on late Feb. 26, noting that fiscal discipline remained in place in 2015 despite two parliamentary elections.
However Fitch said the “geopolitical scene” had worsened, pointing to Turkey’s involvement in the Syrian conflict, the breakdown of the peace process, several fatal bomb attacks and tensions over Turkey shooting down a Russian jet.
“Elections in November 2015 resulting in another term for the Justice and Development Party (AKP) have eased domestic political uncertainty, although the prospect of constitutional reform in order to strengthen the powers of the presidency means some uncertainties linger,” it said.
The implementation of pre-election spending commitments was expected to worsen the fiscal position in 2016, with the central government deficit seen widening to 2 percent of GDP, it said.
Turkey’s lira weakened nearly 2.5 percent to 3 against the dollar on Feb. 26 ahead of the ratings review and as upbeat U.S. economic data helped bolster the U.S. currency. After the Fitch statement, it stood at 2.9984.
Fitch said it assumed that pressure from recent currency depreciation and a minimum wage hike would push inflation into double digits during 2016.