More confidence in Turkey's economic recovery: Fitch
Fitch Ratings has greater confidence that Turkey’s economic growth is recovering in the near term, according to the ratings service’s Douglas Winslow.
“In 2020 we expect a recovery, with GDP growth going from 0.4 percent last year to 3.9 percent this year,” Winslow, director in Fitch Ratings’ sovereign team, told state-run Anadolu Agency.
“That’s driven by private consumption and supported by the lower interest rate, as well as a pretty sharp pickup in private bank lending, which is growing around 25 percent currently.”
Pointing to Turkey's recovering economic outlook, Winslow said: “We also expect investment to return to growth this year of around 3 percent. A bit more generally, investment sentiment has also been supported by the better current account position, which moved to a surplus of 0.2 percent of GDP in 2019.”
He added: "We do see some near-term risks of greater volatility. For example, from geopolitical developments, and particularly from the monetary policy if interest rates are cut too much, and that puts additional pressure on the lira."
Asked about the possibility of upgrading Turkey’s sovereign credit rating in the future, Winslow said: “In terms of opportunities from the ratings perspective, if we saw better reform progress against the government’s new economy program, [this] would be helpful for the ratings. For example, if we saw pension reforms to boost to Turkey’s saving rate… We think the condition for implementing difficult reforms is better this year given that the economy is recovering and there are no elections planned [or scheduled] for three-and-a-half years.”
Noting that Fitch upgraded Turkey’s 2020 GDP forecast by 0.8 percentage points to 3.9 percent and 2021 GDP is forecast to rise 0.4 percentage points to 4.0 percent, he added: “We have greater confidence that the growth is recovering in the near-term. And we have upgraded the GDP forecast not just to 3.9 percent this year but also 4.00 percent next year.
“We also maintained our assessment that the longer-term potential trend growth of the Turkish economy is around 4.3 percent. The composition and sustainability of GDP growth is particularly important for the rating. Some of the government’s planned reform measures are aimed at reducing the risk of greater imbalances building up."