Rating unchanged but risk perception growing

International Credit Rating Agency Fitch did not change Turkey?s outlook in its recent evaluation of the country, which resulted in comforting the markets slightly. Many people were not expecting Fitch to lower the ratings with elections approaching, but looking at the positive reaction of the markets, we concluded that ?it means some uneasiness did exist.?

Turkey?s rating was BBB- and the outlook was stable according to Fitch, which said low oil prices and ample liquidity were good for the Turkish economy.

However, Fitch Ratings Senior Director Paul Rawkins said on Monday inflation in Turkey is 50 percent more than the Turkish Central Bank?s target and the outlook did not allow for interest rate cuts. Fitch forecasts inflation at 7.5 percent this year and 6 percent in 2016, he said.

In other words, Fitch did not lower Turkey?s rating; however it is not positive about the inflation rate.
The same day, another rating agency, Moody?s, issued a report which closely concerns Turkey. The report said the currencies of countries which have large pending external debt payments, such as Turkey, Malaysia and Chile, have depreciated, making it more expensive for companies to service foreign currency debt. It said countries with large current account deficits, such as Turkey and South Africa, are more susceptible to external pressures due to the difficulty in financing their deficits.

In short, we need to say that even though Turkey?s rating did not change, risk perception for the economy has increased. The most important reason for this is of course the serious valuation of the dollar due to the nearing Fed interest rate raises and also that our economy was unprepared for this. Thus, it should not be surprising if there is a decline in...