Turkish current account improves, but durability key: Fitch

Turkish current account improves, but durability key: Fitch

The fall in the Turkish current account deficit last year demonstrates the economy’s capacity for rebalancing, Fitch Ratings said by a written statement on Feb. 12.

The durability of this rebalancing and the extent to which it reduces Turkey’s vulnerability to sudden shifts in investor sentiment is an important part of our sovereign ratings assessment, it added.

The Central Bank said on Feb. 11 that the current account gap fell by 29 percent to $45.8 billion in 2014.

“Rebalancing towards sustainable growth that is less reliant on net capital inflows, shown by the lower current account deficit (CAD), supports Turkey’s sovereign credit profile. However, Turkey is a standout among emerging markets because of the size of its CAD, while large gross external financing needs leave it vulnerable to shifts in investor sentiment. This is seen in the continuing volatility of the Turkish lira, which hit an all-time low against the dollar earlier this week,” it said.

External financing has been resilient to shocks in recent years and Turkey has not experienced a ‘sudden stop’ of capital inflows, it added.

“Nevertheless, this resilience may be tested in 2015, by U.S. monetary policy tightening or geopolitical risks, which are already being felt in the sharp fall in exports to Russia, Ukraine, and Iraq,” it warned.