Turkey outlook hinges on ability to spur growth, but risks remain: Moody's

Turkey's credit outlook will hinge on the new government's ability to tackle slowing growth and high inflation as credit risks of the country still remain, ratings agency Moody's said on Nov. 4.

The Justice and Development Party (AKP) won back its single-party rule in an election on Nov. 1, ending months of uncertainty for investors and briefly sending assets sharply higher.

But that rally largely petered out after a day, and investors are once again forced to confront deeper structural problems, such as waning growth and large external financing needs.

"The election result removes political uncertainty," Alpona Banerji, a senior credit officer at Moody's told a conference in Istanbul.

"However, the credit outlook will be determined by the policy environment and policy implementation that would overcome a slowdown in growth and high inflation, as well as the inhospitable capital environment that most (emerging markets) are going to be facing."

Government officials said in July the economy was likely to expand between 2 and 2.5 percent this year, falling far short of an official target of 4 percent, due to the uncertainty after a June election failed to produce a single-party government.

Economists also expect growth will fall short of official targets next year, too, a Reuters poll has shown.
Moody's has a "Baa3" rating on Turkey, with a "negative" outlook. It is next due to review Turkey on Dec. 4.

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