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Fitch Maintains Turkey's Rating ‘BB-’ With Stable Outlook

Fitch Maintains Turkey's Rating ‘BB-’ With Stable Outlook

Sunday, 3 November, 2019 - 12:45
Reuters photo

Credit rating agency Fitch has maintained its long-term rating of Turkey's economy at “BB-.”

In a statement on Saturday, the agency raised its outlook for Turkey’s sovereign assessment to “stable” from “negative.”

“Turkey has continued to make progress in rebalancing and stabilizing its economy, leading to an easing in downside risks” since July, Fitch said in the statement.

“Geopolitical risks continue to weigh” on the rating, Fitch said. Still, “we do not expect Turkey’s operation in Syria to have a significant impact on credit fundamentals in the absence of a more far-reaching conflict,” the rating company added.

It also cited an improving current account balance, continued economic growth and falling inflation.

Fitch last lowered Turkey’s rating in July, days after President Recep Tayyip Erdogan unexpectedly removed central bank Governor Murat Cetinkaya for not cutting interest rates.

The central bank has since delivered three bigger-than-forecast interest-rate cuts as part of a front-loaded easing cycle, bringing cumulative reductions in the second half of the year to 10 percentage points.

The rating company warned of deteriorating institutional independence and the credibility of economic policy.

"The current account balance has improved, forex reserves have edged up, economic growth has continued, inflation has fallen and the lira has held up despite large cuts in interest rates, buoyed by more supportive global financing conditions and the recent US announcement on the removal of Syria-related sanctions.”

US President Donald Trump briefly imposed sanctions on Ankara in October to persuade it to stop its operation in northeastern Syria against Kurdish militia fighters, former US allies.

But the US House of Representatives this week backed a resolution calling on Trump to impose sanctions on Turkey over its operation.

Ankara has also faced the prospect of US sanctions due to its purchase of Russian S-400 missiles.

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