Rating agencies cautious on Turkey
Posted by meb at February 4th, 2008
Following the Justice and Development Party’s (AKP) announcement of its economic policies earlier in January, all eyes are now focused on international credit rating agencies.
The global liquidity squeeze and internal dynamics have reduced expectations of a rating upgrade for Turkey in the first half of this year. Reforms and fiscal discipline are crucial for Turkey, revealed Fortune Magazine, which met with four agencies that rate Turkey.
Despite the “decoupling” theory, which defends that developing markets have proved to be resistant to turbulence deriving from the United States and hence will not be affected by it, analysts of credit rating agencies are cautious.
The planned reforms should be implemented urgently for an upgrade in Turkey’s rating, agreed analysts and added that changes in Turkey’s current outlook are necessary. Social security reform should be implemented, said the analysts, drawing attention to risks such as an overvalued Turkish lira (YTL), the current account deficit and inflation.
Fluctuation a test:
The changing global climate has the potential of becoming a painful test in terms of the Turkish economy’s resistance, said Kristin Lindow, an analyst at Moody’s Turkey. “However, we expect (Turkey) to pass this test. Therefore, its stagnant outlook is ongoing.”
No country can escape the wind of globalization, said Ayşe Botan Berker, managing director of Fitch Ratings Turkey. “What is important is not being worse than others. Countries should prove that they are better [than the rest] by revealing positive and strong aspects.”
Global investors are oriented toward the dollar, said JCR Eurasia Rating Chairman Orhan Ökmen. “Should the crisis deepen, Turkey may face serious problems and fail to attain its targeted growth. Domestic investors may become more influential through privatizations.”
Standard and Poor’s (S&P) Turkey Analyst Farouk Soussa expects an arrangement, which could be a lax one, with the International Monetary Fund after May. “Still, what is important for Turkey is to continue with reforms and fiscal discipline. An overvalued YTL is a source of concern. However, the actual cost would be revealed with a slowing of growth.”
Source: Turkish Daily News
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