AKP’s win has no impact on Turkey ratings

Standard & Poor’s Ratings Services said that the Turkish parliamentary elections held Sunday, which resulted in the ruling Justice and Development Party (AKP) retaining its absolute majority, will have no immediate impact on the credit ratings on the Republic of Turkey (foreign currency BB-/Stable/B; local currency BB/Stable/B; Turkish national scale trAA+/–/trA-1).

The outcome bodes well for a continuation of the prudent economic policy-making that has underpinned Turkey’s improving creditworthiness over the past five years. Much depends, however, on the selection of a new president. If this is managed harmoniously, and the AKP illustrates continued commitment to prudence and reform, the ratings on Turkey could improve. Conversely, should political volatility cause fiscal slippage or shifting policy priorities the ratings would come under downward pressure.

Turkey’s large external imbalances leave the country’s financial markets vulnerable to swings in investor confidence, including those arising from political volatility. Parliamentary elections were prompted by the opposition’s refusal to approve the AKP’s candidate for president, foreign minister Abdullah Gul.