Fitch makes positive comment on Turkey
Posted by meb at April 27th, 2007
Fitch would not rule out an upgrade to its ‘BB-’ rating for Turkey this year after the nomination of the country’s foreign minister for president reduced political risk, the credit-rating agency said on Wednesday, reported Reuters.
Turkey’s ruling AK Party picked Foreign Minister Abdullah Gul, architect of Turkey’s European Union bid, as its candidate on Tuesday. Markets had been concerned that Prime Minister Tayyip Erdoğan would run for president.
Speaking to Turkish business daily Referans, Fitch Turkey’s Chairman of the Board Botan Berker noted that Turkey’s Fitch rating has been positive for a long while.
“We have been standing our ground for a long time. As we have declared earlier, the most important reason as to why there has not been a change in the rating was political ambiguity. If this ambiguity is removed and the economy follows its current course, then it would become possible to reevaluate the ratings and to move the positive appearance up a notch. This can be effective immediately after general elections results are known,” she said.
Current account deficit still a problem
Berker emphasized that it is hard to estimate what the outcome of the presidential elections will be. However he said he found it positive that there were no fluctuations as the declared candidate was received well in general. Berker listed Turkey’s most substantial risks as current account deficit, the large volume of debt, and carry trade.
Carry trade mostly has a negative effect on developing countries such as Turkey, she said, adding, “It is impossible to avert carry trade during this globalization process… The only way to avoid the negative effects is to complete the structural reforms as best as you can and wipe out the structural fragilities”
Political risk reduced
In an interview with Reuters Edward Parker, head of emerging Europe sovereigns for Fitch Ratings, said of Gül’s candidacy: “It has reduced one of the major political risks this year.”
Gül, a former Islamist, is widely seen as more moderate than Erdoğan. Investors had also been worried that if Erdoğan quit party politics to take up the presidency the AK Party could lose ground in November parliamentary elections, raising the risk of an indecisive coalition government.
“My current position is no rating change this year. It’s not set in stone. If events work out favorably and smoothly, we would not rule out change before then (the year-end), particularly if (parliamentary) elections are brought forward,” said Parker, adding, “By showing some willingness to compromise, and listen to the people and parliament, Erdoğan has come out looking as if he has the interests of the country above his own personal interest.”
Parker said Fitch has a positive outlook on Turkey due to an improving trend of credit-worthiness. “The economy is growing very strongly. Turkey is having its longest, strongest recovery since the 1960s,” he said, but added the large current account deficit remained a concern.
source: Turkish Daily News
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