Moody’s backs fis­cal strength of Turkey

Daily Sabah (Turkey) - - Money -

FIS­CAL strength has been a source of sta­bil­ity and support to the over­all risk pro­file of Turkey, Moody’s Sovereign Risk Man­ag­ing Direc­tor Yves Le­may has said.

“From a rat­ing stand­point, fis­cal strength has been a source of sta­bil­ity and support to the over­all risk pro­file of the coun­try. The his­tor­i­cal track record of small bud­getary deficits and rel­a­tively low pub­lic in­debt­ed­ness, par­tic­u­larly rel­a­tive to sim­i­lar rated peers, con­tin­ues to [be] a source of support to the rat­ing,” Le­may said in an in­ter­view with Anadolu Agency (AA) on Tues­day.

Not­ing that Moody’s sees po­ten­tial for some deficit slip­page this year with re­gard to the eco­nomic support mea­sures re­cently an­nounced, he said: “But over­all our as­sess­ment of the fis­cal strength has been and re­mains a source of credit strength for Turkey.

“Turkey is go­ing through a chal­leng­ing time. What we have seen in the last sev­eral weeks is a man­i­fes­ta­tion of that external vul­ner­a­bil­ity which re­flects the coun­try’s large cur­rent ac­count deficit and high external debt.”

He also said the credit rat­ing agency has a con­struc­tive view of Europe’s growth out­look this year and next. “It will con­tinue to support ex­ports from Turkey and, there­fore, con­tribut­ing to the growth nar­ra­tive of the coun­try.

“We have seen last year net ex­ports turn­ing pos­i­tive in Turkey, partly as a re­sult of stronger Eu­ro­pean growth. At the mar­gin, it’s a pos­i­tive ele­ment that should help the net ex­port to con­tinue to support growth in the next few years,” Le­may said. He said the di­rec­tion of eco­nomic poli­cies un­der the new ad­min­is­tra­tion and the ex­tent to which they would ad­dress ar­eas cur­rently pres­sur­ing the credit pro­file of the coun­try re­mains im­por­tant for Moody’s. “We are talk­ing about things like struc­tural re­forms and in­fla­tion­ary pres­sures that need to be ad­dressed as the econ­omy is over­heat­ing,” Le­may added.

Shar­ing the lat­est fore­casts of the rat­ing agency, Le­may said Moody’s ex­pects Turkey to grow by 4 per­cent this year and “slow down a bit fur­ther” in 2019.

He also said Turkey’s cur­rent ac­count deficit is ex­pected to be “slightly above or around 5 per­cent” in 2018 and 2019.

“The growth fore­cast for this year did not cap­ture the re­cent fis­cal mea­sures that were an­nounced just last week. That could, in the­ory, po­ten­tially have a pos­i­tive in­flu­ence on growth this year although we also see down­side risks to the growth story due to the econ­omy over­heat­ing, per­sis­tent high in­fla­tion and external vul­ner­a­bil­i­ties.”

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