Moody’s to decide on Turkey’s credit rating after Nov. election
ANKARA – Moody’s will wait for the results of Turkey’s November 3 election before making any decisions on its credit ratings, currently on a negative outlook, a senior analyst at the ratings agency said yesterday. «We have a negative outlook in place right now but I think it’s appropriate in the circumstances since there is a tremendous amount of uncertainty about what’s going to come about after the elections,» New York-based analyst Kristin Lindow told Reuters. «That being said, we haven’t put the rating on review for downgrade, we’re just waiting to see whether or not the situation will be able to stabilize or eventually improve. «Right now we take into account the fact that there is a very real possibility that there will be an interregnum when the implementation of the economic reform program and good fiscal management and so on may slip,» she said. «So at this point we’re very much in a somewhat hopeful (position) but still recognizing that the situation could develop in a negative way as well,» Lindow said. Moody’s current rating on Turkey’s foreign currency debt is B1 with a negative outlook. Turkey goes to the polls on November 3 with opinion polls indicating a complete overhaul of the political landscape. The current poll leader is the Justice and Development Party (AKP), untried in government and suspected by the powerful military of Islamist leanings. Its leader Recep Tayyip Erdogan has been banned from the election due to a past conviction for Islamist sedition but markets are more concerned about the party’s commitment to Turkey’s $16-billion economic recovery program. Erdogan has said AKP will stick to the program with minor refinements. Some analysts say Turkey may need more foreign financing next year, particularly if Washington launches a military campaign against Turkey’s southern neighbor Iraq. Turkey fears a war would hit tourism revenues and foreign investment while rising oil prices would raise the price of imports. «Right now, there isn’t a substantial need for external financing as far as the government is concerned,» Lindow said. «It’s really the whole public and private sector, together they will have a very large refinancing need. So the atmosphere has to be generally supportive of that,» she said. «That being said, in recent weeks we’ve seen that the commercial banks have been able to refinance their facilities at very favorable rates. So the private sector isn’t being hamstrung by the current political uncertainty the way that the government is,» she said. Turkey’s total foreign debt stock as of the end of June was around $126 billion, of which around $52 billion is on the central government budget. The total also includes borrowing by state banks and other state institutions as well as the private sector. Lindow said Moody’s did not expect to make any changes to its ratings or outlooks until after the election. «(We’ll wait) to see what kind of government arises, what their economic profile will be, and policies, and also how stable that coalition will seem in terms of being able to have a concerted and consistent policy,» she said. Lindow said markets had remained relatively calm during recent political uncertainty linked to efforts to delay the election, now almost certain to go ahead. «I think it also reflects the confidence that the domestic economic recovery is well underway in Turkey and that the external financing situation is reasonably good,» she said.
