ISTANBUL — Though credit rating agency Moody's opted not to change Turkey's credit rating on Friday, a downgrade risk remains, as updates from major ratings agencies are scheduled to take place prior to the year's end and analysts remain concerned about the country's short term outlook. Immediately prior to Moody's decision not to alter Turkey's credit rating, investment banking firm Goldman Sachs released a statement saying that if Turkey's score was lowered, it would not come as a surprise.
Ratings agency Fitch is scheduled to adjust its ratings on Sept. 18, S&P will make an evaluation on Nov. 6 and Moody's is expected to weigh in again on Dec. 4.
S&P said on Friday that political uncertainties remain high in the midst of a possible early election, and that these uncertainties may result in further depreciation of the already floundering Turkish lira and may also negatively impact consumer confidence and inflation rates.
Critics of President Recep Tayyip Erdogan insist that the recent strikes on Kurdistan Workers Party (PKK) outposts in northern Iraq are a means of drumming up support for the Justice and Development Party (AK Party) in the event of an early election so that the party can regain the parliamentary majority in lost in the June 7 general election.
Last month, Finance Minister Mehmet Simsek expressed his desire for a coalition government, saying that an early election would prolong political uncertainty.
“Everyone wants Turkey to have a strong coalition government,” Simsek told a news conference in Ankara while announcing June budget developments. “Having an election again is of course a negative scenario, because another election means in a sense facing uncertainty through virtually the whole of 2015,” he said.
In the weeks after the June 7 general election, foreign investors' bond portfolios fell $1.7 billion based on central bank figures, as investors fretted that an unstable government would be unable to deliver the structural reforms needed to revive growth.
Expectations for a recovery in Turkish growth remain low and the country should adopt a comprehensive macroeconomic policy in which it may focus on parrying short-time fragilities and make reforms to boost productivity, Deloitte Turkey said in a report on the Turkish economy last month.
Even though growth in the first quarter surpassed expectations, Deloitte anticipates an above-target inflation rate along with a high current account deficit at the end of the year, the leading consulting firm stated. According to the report, sluggish growth and external pressures along with other fragilities surrounding the country require Turkey to form a well-matched coalition government and establish credible economic management. The Turkish lira has plummeted in 2015 amid political tension and war brushing up against Turkey's border. Export figures have been disappointing as trade with some of Turkey's top regional partners has dropped due to ongoing wars, while the tourism industry has taken a hit so far in 2015 amid declining foreign visitors and diminished hotel occupancy rates. — Agencies
