"Turkey rate rise shows responsiveness, risks remain": Fitch Ratings

12:54 29.07.2013
Turkey

International Rating Agency Fitch Ratings said on Thursday that the sharp drop in net capital inflows, currency depreciation, and fall in international reserves remained within the tolerance of Turkey's 'BBB-' rating.

Fitch published a report about Turkey's recent economic situation.

The increase in the Central Bank of Turkey's (CBT) overnight lending rate signaled the Turkish authorities' greater readiness to address the risks presented by currency weakness, high inflation, and falling capital inflows, Fitch Ratings said in its information note.

"Turkey is still vulnerable to shifts in market sentiment, its external finances remain a key sovereign rating weakness, and balancing growth, price and exchange rate stability concerns present a policy challenge. The sharp drop in net capital inflows, currency depreciation, and fall in international reserves remain within the tolerance of Turkey's 'BBB-' rating" said the rating agency.

According to Fitch statement, "the recent developments serve to highlight Turkey's vulnerability to shocks against a background of domestic political and social unrest and volatile investor sentiment towards emerging markets in general, as speculation about the eventual withdrawal of quantitative easing continues."

"As we have previously said, persistent political and social unrest could deter tourism, destabilise short-term capital inflows, push up inflation and damage economic growth," the statement said.

Adapted from Anadolu

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