International ratings institution Fitch has finally changed Turkey's grade, considered long overdue with Turkey's successful performance during the economic crisis surpassing that of even developed nations.
Fitch's upgrade was to BBB- for long-term foreign currency Issuer Default Rating (IDR) and the long-term local currency IDR to BB+. The outlooks on the long-term ratings are stable. Fitch has thereby become the first ratings institution to give Turkey this level credit grade since 1994.
Fitch Ratings upgraded Turkey citing underlying strengths and an easing in near-term risks for the economy. Fitch highlighted Turkey's moderate and declining government debt burden, a sound banking system, favorable medium-term growth prospects and a relatively wealthy and diverse economy. Fitch predicted a soft economic landing. "Fitch believes that the Turkish economy is on track to return to a sustainable growth rate, having narrowed the current account deficit and lowered inflation after overheating in 2011," it said. The economy was expected to remain more volatile than investment grade peers and an external financing shock and recession were likely at some point but its credit worthiness has become more resilient to shocks, Fitch added.
BUSINESS WORLD: A POSITIVE BUT OVERDUE UPGRADE
Chairman of Turkey's Exporters Assembly Mehmet Büyükekşi states that although it is extremely positive, it has been long overdue that Turkey has been given the grade it rightly deserves. "We are hoping to draw in more direct foreign investment," says Büyükekşi. Independent Industrialists and Businessmen Association Nail Olpak also expressed that the upgrade was both positive and overdue while Kibar Holding Vice Chairman of the Executive Board Ali Kibar called it "the right decision." Sabancı Holding Chairman of the Executive Board Güler Sabancı also said, "These ratings institutions are late in raising Turkey's note."
Pre-Conference Rating Upgrade
Fitch has therefore announced their long-awaited decision regarding Turkey's rating. There was widespread speculation that Fitch might make such a move prior to the November 8th conference in Turkey.
ISE REACHES A PEAK
Fitch's upgrade has been reflected positively on the Istanbul Stock Exchange. After breaking record after record, the ISE closed at a historic high of 72,737 points, a 1.84percent increase.
VIOLATION OF A BELATED RIGHT
Economy Minister Zafer Çağlayan commented on the upgrade by calling it the "acknowledgement and validation of a belated right. I hope this upgrade will show the way to other rating agencies." Finance Minister Mehmet Şimşek said the upgrade would positively affect risk perception, and boost capital inflows and the country's performance. Minister of Science, Industry and Technology Nihat Ergün said that with this upgrade a psychological threshold has been surpassed."
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