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Announcement:

Moody's: Turkey's credit profile balances resilient growth and relatively strong public finances against political risk and external vulnerability

 The document has been translated in other languages

Global Credit Research - 17 Nov 2017

New York, November 17, 2017 -- Turkey's (Ba1, negative) credit profile reflects its large and flexible middle-income economy, resilient growth and favourable demographics, Moody's Investors Service said in an annual report today. The country's key credit challenges include political risk and high external vulnerability.

The report, "Government of Turkey -- Ba1 negative, Annual credit analysis", is now available on www.moodys.com. Moody's subscribers can access this report via the link at the end of this press release. The research is an update to the markets and does not constitute a rating action.

"Although Turkey's public finances have deteriorated marginally over the past year due to fiscal stimulus and the weaker lira, the country's resilient economic growth and manageable government debt metrics continue to provide key credit anchors," said Kristin Lindow, a Moody's Senior Vice President and co-author of the report.

Public finances are a source of strength for Turkey's sovereign creditworthiness. That said, fiscal outcomes will likely be challenged in an environment of rising global interest rates, already wider spreads and larger borrowing needs.

Although Turkey's stock of debt remains moderate at less than 30% of GDP, bigger fiscal deficits and associated borrowing have put the debt-to-GDP ratio on an upward path after more than a decade of steady decline.

Under Moody's central scenario, the general government debt-to-GDP ratio is expected to stay below 30% in 2018. High nominal GDP growth -- fed by rapid inflation -- will largely offset heavy borrowing to finance wider budget deficits.

Turkey has a high susceptibility to event risk mainly driven by domestic political risks and the country's large external financing needs due to wide current account deficits and sizeable external or foreign currency refinancing requirements.

Balance-of-payments pressures constrain any upgrade in Turkey's sovereign rating, as long as external imbalances and annual refinancing requirements remain large. However, upward rating pressure could follow structural reductions in these vulnerabilities or improvements in Turkey's institutional environment or competitiveness.

Reduced political risk -- while credit positive -- would not result in rating upgrades without sustainable improvement in external vulnerability, although it could lead to a stabilization of the rating outlook.

Turkey's sovereign rating could be downgraded if the probability of a balance-of-payments crisis were to rise. Such an event would likely be associated with some combination of a rapidly weakening exchange rate and a sharp reduction in foreign exchange reserves driven by shortfalls in funding the country's wide external deficit.

Sustained lower growth and a related worsening in the government's fiscal strength could also lead to a downgrade, as could a further erosion of institutional strength.

The coherence of Turkey's macro policy framework and the maintenance of fiscal and external stability will remain important drivers of sovereign creditworthiness.

Subscribers can access the report at: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1084441

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: New York +1-212-553-0376, London +44-20-7772-5456, Tokyo +813-5408-4110, Hong Kong +852-3758-1350, Sydney +61-2-9270-8141, Mexico City 001-888-779-5833, São Paulo 0800-891-2518, or Buenos Aires 0800-666-3506. You can also email us at mediarelations@moodys.com or visit our web site at www.moodys.com.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

Kristin Lindow
Senior Vice President
Sovereign Risk Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Yves Lemay
MD - Sovereign Risk
Sovereign Risk Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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