Protests raise Turkey’s deficit risks: Moody’s

ISTANBUL - Hürriyet Daily News

Moody’s says the countrywide protests have increased Turkey’s balance of payment risks by reducing tourist arrivals and portfolio investment inflows.

Anti-government protests in Turkey have heightened the country’s balance of payment risks, rating agency Moody’s said in a statement yesterday. 

“These political disturbances become increasingly credit negative the more they intensify and the longer they continue because they heighten the government of Turkey’s (Baa3 stable) susceptibility to balance of payments risks through reduced tourist arrivals and portfolio investment inflows, an important source of current account funding,” the rating agency said. 

Moody’s also warned about that continued protests could also deter foreign direct investment (FDI) inflows, a more stable source of current account financing in Turkey. “However, the current level of political and balance of payment risks are captured in our rating and outlook.7,” the agency said. 

According to Moody’s, as long as political calm is restored swiftly, Turkey’s appeal as an FDI destination is unlikely to suffer longterm damage owing to the country’s positive growth prospects, its strategic geographic position, and improving investor climate.

Moody’s praised the democratic legitimacy of the ruling Justice and Development Party (AKP) and the high performance of the Turkish economy. “Turkey’s protestors are focused on Prime Minister Erdoğan’s perceived autocratic tendencies... However, Turkish voters have ample opportunities in the March 2014 local elections, August 2014 presidential elections and June 2015 parliamentary elections to express their dissatisfaction through the ballot box,” the rating agency said. 

Fitch warns Turkey 

The anti-government protests in Turkey are not a threat to the sovereign’s “BBB-” rating at present, Fitch Ratings said on June 7 in a press statement. 

“So far, the demonstrations have attracted educated, middle-class Turks rather than disaffected workers or the unemployed,” the Fitch Ratings said, adding that the Turkish economy has performed well, inflation has come down, and unemployment in 2012 was at a seven-year low of 9.2 percent. 

“Much will depend on how the authorities respond to the protests,” Fitch Ratings warned, adding that poorly handled, the situation could escalate, with adverse consequences for the economy.