Reform said key to Turkey ratings

ISTANBUL (Reuters) – Imminent revisions of Turkey’s gross domestic product data are not key to the country’s rating perspective but structural reform will be crucial to a rating upgrade, Moody’s Vice President Kristin Lindow told Reuters. In a long-awaited move, the Turkish Statistics Institute said on Wednesday it had completed a revision of GDP data and would publish the results tomorrow. Some analysts had said the revision could support a ratings upgrade. «From a rating perspective, we look more at capacity to pay indicators: (ratios of) debt or interest payments to revenues and also external debt to current account receipts, and current account balance to exports,» Lindow told Reuters in an e-mail note late on Wednesday. «Accordingly, the rise in estimated GDP doesn’t change these assessments,» she said. Moody’s has a Ba3 rating on European Union-candidate Turkey’s government debt, below investment grade, and a stable outlook. Lindow said however that the government’s progress on structural reforms would be key to an upgrade. The pro-business Justice and Development Party government has slowed its pace of reform in the last couple of years, to the frustration of investors. «Key factors to move the rating up relate to concrete progress on structural reform that improves long-term fiscal sustainability,» she said. «The timetable is therefore more up to the government than to us, since right now things seem to be a bit in a holding pattern in some of these areas,» she said, not ruling out however that progress on this front could speed up soon. Investors are waiting for parliament to pass a long-delayed social security reform, which the International Monetary Fund has demanded and which is seen as fundamental to sustainable state finances. Lindow also said the agency would be revising its main forecasts in the next few weeks. She saw economic growth at around 4 percent – compared to a market forecast of 4.7 percent – and the current account deficit around $41 billion, just below a market forecast of $41.9 billion.

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