Standard & Poor's reaffirms Turkey's BB+ rating, forecasts 2.7% growth by 2018

Published 06.11.2015 20:50
Updated 07.11.2015 02:15
Standard & Poor's reaffirms Turkey's BB+ rating, forecasts 2.7% growth by 2018

International rating agency Standard & Poor's reaffirmed Turkey's foreign currency rating at BB+ and the TL sovereign rating at BBB- on Friday, with a "negative" outlook.

S&P said the decision reflects the country's ability to absorb future external shocks with its flexible exchange-rate and well-funded banking system.

The agency said it expected government debt levels to remain "manageable" and Turkish banks to remain well-regulated and sufficiently capitalized in the absence of "external shocks".

After the election victory of the Justice and Development (AK) Party, who will be able to form a government without a coalition, The S&P forecast growth for Turkey at 2,7 percent between the years 2016-2018 and the unemployment rate will continue to be at around 10 percent.

However, the U.S.-based agency said the outlook remained negative and outlined a scenario in which "external financing becomes both more expensive and scarcer and institutional checks and balances deteriorate further".

The agency forecast real gross domestic product (GDP) would grow by 3.1 percent in 2015.

Following Sunday's election victory for the Justice and Development (AK) Party, the agency predicted that "current policy settings will prevail, implying real GDP growth averaging 2.7 percent in 2016-2018 and unemployment staying at about 10 percent."

It added: "Although Turkey's economy benefited from stronger-than-anticipated demand in the first half of this year, we think political uncertainty in the run-up to the November elections is likely to have weighed on growth in the second half."

Standard & Poor's said the Turkish authorities had accurately flagged key risks in the past, such as "high and recurrent" external deficits resulting from low domestic savings rate.

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