Turkey must tackle weaknesses

TURKEY’S sovereign rating can ride out the current market turbulence, if authorities there move to address the economy’s main weaknesses after upcoming presidential and parliamentary elections, Fitch said yesterday. Fitch has a “junk” BB+ rating on Turkey’s foreign currency debt, but an investment grade BBB- on domestic bonds, which is two notches higher than both S&P Global and Moody’s. Unlike Moody’s, which has issued a downgrade warning, both Fitch’s ratings also have “stable” outlooks. There are stresses, however. Turkey’s central bank recently hiked interest rates more than 4 percentage points to stem a run on the lira triggered by concerns about political interference in monetary policy, a high current account deficit and even higher inflation. President Tayyip Erdogan has stepped up pressure on the central bank before presidential and parliamentary polls on June 24. “They have dealt with some of the near-term stresses, but we still have the uncertainty about political influence over monetary policy,” Paul Gamble, Fitch’s top “emerging” Europe sovereign analyst, said. “And more broadly, the fact that monetary policy has been unable to get inflation to anywhere near the inflation target.” – Reuters