Turkey completes electoral cycle, political risks persist

The outcome of Turkey's general election on Nov. 1, which saw the Justice and Development Party (AKP) regain its parliamentary majority, follows a period of heightened political uncertainty that will not necessarily come to an end, international credit rating company Fitch Ratings has stated.

"The implications for Turkey's sovereign credit profile and rating will depend on whether the result produces a more stable and predictable political environment that is conducive to structural reform and economic rebalancing," Fitch said in its report on the results of the Nov. 1 election.

"The ruling AKP won close to half the vote, and a parliamentary majority of over 40 seats, although not the 330 seats that would enable it to change the constitution. The result concludes Turkey's 2013-2015 electoral cycle, which had been extended following June's inconclusive election and the failure of coalition negotiations that led to a second poll," it added.

"Reduced uncertainty over elections and the composition of the government does not necessarily translate into reduced political risk. Domestic political tension will remain high if Recep Tayyip Erdo?an resumes his efforts to extend the power of the presidency. The peace process with the Kurdistan Workers' Party (PKK) has broken down, and it is uncertain whether it can resume post-elections, despite the Peoples' Democratic Party (HDP) again securing enough votes for parliamentary representation. Together with spill-overs from regional instability, this has resulted in escalating violence in Turkey since June ? Our affirmation of the 'BBB-'/Stable sovereign rating in September acknowledged the deteriorating political environment," stated the report.
Political risk has long weighed on Turkey's sovereign...