Moody’s warns of pressure
ISTANBUL - Hürriyet Daily NewsOn the heels of Standard and Poor’s recent note, the rating agency Moody’s has announced that both domestic and external instability could exert downward pressure on Turkey’s positive credit rating outlook and its Ba2 credit rating. However at this juncture, the agency is not yet making any changes to Turkey’s outlook or credit rating.
Moody’s warned that Turkey’s current account deficit was its Achilles heel and that in the past 18 months risks related to this were increasing. In terms of external pressure Turkey is also becoming more vulnerable.
Margin for error low
Moody’s also added that Turkey’s Ba2 credit rating was based on the flexibility of Turkey’s public sector financing during the global economic crisis.
For Turkey’s to increase its credit rating, the country would need to apply sound financial and monetary policies in the face of instability, said the agency, stressing that the margin for error was dwindling given the difficult global environment.
Moody’s also added that if Turkey were to increase its foreign exchange reserves it would act as a buffer and allow the country to be more flexible to shocks to its balance of payments, which would then exert a positive impact on its credit rating.