Friday, 18 September 2009
International credit rating agency Moody's Investors Service has raised its outlook for Turkey's Ba3 bond rating to positive from stable. Moody's said Friday that the move reflects Turkish economy's improved resilience in the face of shocks, as illustrated by its unassisted performance during the global crisis of the past two years.
"The positive outlook acknowledges that the Turkish economy was better prepared to face the credit crunch and the resulting global recession than would have seemed possible given its dependence on external capital," said Kristin Lindow, the Regional Credit Officer for Europe and Africa in Moody's Sovereign Risk Group. "Moreover, the government did not have to rely on external support from the IMF or other official sources as it had needed in past crises," Lindow said.
Moody's said that 10 percent contraction in Turkey's GDP during the first half of 2009 was severe, even by comparison to the 2001 financial crisis. Nonetheless, Lindow said that the local financial market handled well the scarcity of external capital inflows and the tightening of credit conditions.
"This has been evidenced by the government's ready access to both domestic and external credit and the rapid decline in market interest rates from their peak. Heavily indebted private sector companies were able to roll over or repay their own external obligations without government intervention," she said.
"The crisis has not passed for Turkey. Its effects continue to reverberate across the economy. At least three years' of improvements in government debt affordability metrics have been lost. Moreover, there are indications that the recovery reported in the second quarter GDP has slowed," Lindow said.
Lindow noted that the new update to the Medium Term Expenditure Plan provides some assurance that the deterioration in the public finances that occurred in 2009 will gradually start to reverse through spending discipline and revenue enforcement.
Moody's has also changed the outlook on Turkey's B1 foreign currency bank deposit ceiling to positive from stable.
Moody's last rating action on Turkey was taken on May 24, 2006, when the country ceiling for foreign currency debt was upgraded to Ba1 from Ba3. Prior to that, Moody's last changed the debt ratings of the Turkish government on December 14, 2005, when they were upgraded from B1 to Ba3.
