Turkey’s ratings stable despite political confrontation – Moody’s

Moody’s Investors Service says the recent political turbulence in Turkey is not likely to fundamentally derail the country’s current ratings nor its ongoing progress towards economic and political modernization, although considerable uncertainty remains about how the situation will play out.

“Despite tensions over the selection of the next president due to the military’s objections to the ruling party candidate, the government’s Ba3 ratings as well as the Ba1 foreign-currency country ceiling are sufficiently capable of absorbing such volatility, just as they were during the more general upheaval in emerging markets roughly a year ago,” said Moody’s Vice President Kristin Lindow.

She added: “We continue to expect that Turkey’s impressive positive turnaround during the past six years will remain largely intact, mitigating the risks posed by the country’s heavy public and external indebtedness.”

While recent difficulties have understandably shaken the confidence of financial markets and have raised additional concerns about Turkey‘s EU membership prospects, Lindow said, the most likely outcome to the political crisis will be a new civilian government committed to ongoing reform.

“Politics might become more complex should a new parliament comprised of more political parties replace the current alignment in the upcoming elections, as now seems likely,” said the analyst. “The situation remains fluid. Moody’s will continue to monitor developments to ensure the appropriateness of Turkey‘s ratings.”