ECONOMY

Turkish economy has averted a sell-off crisis

KUWAIT (Reuters) – Turkey, with its large current account deficit, is vulnerable to the risk-aversion gripping emerging market investors, although it has weathered the sell-off of the past few weeks without a crisis, Standard and Poor’s said yesterday. Konrad Reuss, S&P’s deputy head of sovereign ratings, said privatization revenues and foreign investment inflows helped Turkey manage the deficit last year, but that both looked likely to slow this year. «Emerging market investors are turning more risk averse and that is a key vulnerability with Turkey,» he told Reuters in an interview on sidelines of an Islamic Development Bank meeting is Kuwait. «In the current environment it will be more difficult for Turkey to manage its wide (current account) deficit.» The Turkish current account deficit, one of the weakest points of its fast-growing economy, was up 40 percent year-on-year in the first quarter at $8.62 billion (6.68 billion euros). «If we hadn’t seen the kind of reform we’ve had over the past few years we might have seen a crisis like we had in the past,» Reuss said. «That Turkey has weathered the sell-off and has absorbed it so well bears witness to the fundamental improvement we have seen in the credit story.» He said progress toward reforms seemed to be slowing, as indicated by delays in passing a social security reform bill. «It’s important to see some renewed reform movement because Turkey is a net importer and has been hit quite hard by the oil price rise,» Reuss said. Turkey’s Parliament is expected to approve the controversial social security reform bill this week, overriding a presidential veto.