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Announcement:

Moody's: Turkey's economy to experience limited and short-lived impact from potential QE tapering thanks to existing buffers

Global Credit Research - 02 Dec 2013

London, 02 December 2013 -- While a potential tapering of the US government's quantitative easing (QE) programme is likely to result in higher funding costs, greater funding outflows and a reduced availability of credit across global financial markets, the impact on various sectors of Turkey's economy will likely be limited and short-lived, says Moody's Investors Service in a new Special Comment published today. Moody's assessment is underpinned by the range of buffers that have been built up in various parts of Turkey's economy since the 2009 recession, which was itself triggered by significant capital outflows.

Specifically, Moody's report analyzes the impact of QE tapering on the Turkish sovereign (rated Baa3 stable), the country's banks and corporates, and Turkish covered bonds. The new report, entitled "QE Tapering & Turkey: Impact on Various Sectors of Turkish Economy Will Likely be Limited and Short-Lived Given Existing Buffers", is now available on www.moodys.com. Moody's subscribers can access this report via the link provided at the end of this press release.

If and when the US Federal Reserve begins QE tapering, Moody's would expect Turkey to face medium-term challenges in meeting its current account financing needs. However, the sovereign's balance sheet and its economy possess sufficient buffers to withstand likely medium-term challenges linked to meeting its own financing needs in a QE tapering scenario. This is because a range of tools introduced since the 2009 recession have strengthened Turkey's ability to withstand volatility in capital flows.

Turkish banks will be able to cope with challenges arising from tighter funding conditions that are likely to result from QE tapering. Despite a somewhat greater reliance on foreign market funding since 2009, and the resulting increase in the Turkish banking system's vulnerability to potentially volatile wholesale market conditions, Moody's considers the system's likely exposure to the effects of QE tapering to be moderate and its liquidity resources to be sufficient.

QE tapering will have a moderately negative impact on Turkish corporates in light of a number of vulnerabilities stemming from corporates' dependency on bank funding, mostly with short maturities, in foreign currencies and at floating interest rates.

Turkish covered bonds will be more resilient to the effects of QE tapering than the above sectors. The sector's legislative framework and market practice offer investors credit protection against potential increases in non-performing loans and declines in property values.

Subscribers can access this report via this link: http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_161004

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: London +44-20-7772-5456, New York +1-212-553-0376, 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.

Sarah Carlson
VP - Senior Credit Officer
Sovereign Risk Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Yves Lemay
MD - Banking
Sovereign Risk Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's: Turkey's economy to experience limited and short-lived impact from potential QE tapering thanks to existing buffers
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