Turkey 'Finally' Gets Investment Grade from Fitch Ratings

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Researched by Industrial Info Resources (Sugar Land, Texas)--Credit ratings agency Fitch upgraded Turkey to "investment grade," confirming the favorable view toward the country's improving economic fundamentals. According to a statement from Fitch, the agency upgraded Turkey's foreign-currency ranking to BBB- from BB+, with a stable outlook.

Fitch said that the country was already making big steps toward deepening its local capital market, with the government now relying on foreign-denominated issues for less than 30% of its debt.

The agency said Turkey could be further upgraded if the country experienced "a material and durable reduction in the current account deficit"--although it noted it did not expect this in the near term--or "a track record of lower and more stable inflation."

Fitch said that the country's external finances "remain a key rating weakness," emphasizing that it expected this year's current account deficit to total $58 billion, or 7.3% of gross domestic product (GDP).

Rating agency Standard and Poor's rates Turkey two levels below, while another agency, Moody's, rates Turkey one below investment grade.

"The investment grade upgrade could trigger flows to Turkish assets," said Ed Parker, a senior analyst at Fitch Ratings in London. "With sound economic policies, the Turkish economy is now more resilient than ever to further foreign shocks." In response to questions from Bloomberg HT Television, he said that the geopolitical risks remain from surrounding economies such as Syria, Iraq and Iran.

Deputy Prime Minister Ali Babacan said that the indicators of confidence in Turkey in international markets signal higher ratings. In a statement he made after the ratings upgrade, he expects steps in similar direction from other rating companies.

On numbers, Fitch forecasts growth to be 3%, 3.8% and 4.5% in 2012, 2013 and 2014, respectively. The inflation is expected to remain above the Central Bank of Turkey's target of 6.5% next year.

The Turkish government cut debt to 36.5% of GDP this year, from 74% in 2004. The government cut its budget deficit to 1.3% in 2011 from 11.9% in 2001. Turkey expects its budget deficit will rise to 2.3% for this year, above the 1.5% it anticipated a year ago. Economic growth in Turkey slowed to 2.9% in the second quarter from 9.1% a year earlier.

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