Low oil prices are expected to help narrow Turkey's current account deficit, Alpona Banerji, vice president and senior credit officer at credit agency Moody's, told Anadolu Agency Wednesday. "Turkey's current account deficit is expected to moderate this year and next year, as a result of the combination of lower oil prices and slower domestic demand," Banerji said. Banerji listed some factors that challenge the Turkish economy: "substantial external vulnerabilities," like the large current account deficit, the "accumulation of external debt" and "an uncertain policy direction given the domestic political environment and geopolitical turbulence."
However, he pointed out that Turkey's large middle class, positive young demographics and diverse trade links are some of the credit strengths of the country, which include a strong track record of fiscal stability, primary surpluses and low government debt levels that allow flexible policy responses. "Moody's would change Turkey's rating outlook to 'stable' if its policy environment stabilizes enough to enable economic and institutional reforms that weaken the ties between economic growth and external finances and improve the country's institutional environment, along with better investor confidence helping to reduce external financing pressures," Banerji concluded. Oil prices have fallen 65 percent since mid-2014, from $115 a barrel in June last year to below $40 per barrel on Tuesday, reaching their lowest level in seven years and recording the most rapid decline since 2008.
"Moody's now expects Turkey's real GDP to grow at an average of 3 percent over the next three years, which follows average growth of 5.4 percent over 2010-2014. In particular, we expect growth to slow to around 2.9 percent in 2015 and remain modest next year as well," Banerji said.
The international credit rating agency affirmed Turkey's "Baa3" government debt and issuer ratings on Dec. 5, but maintained a negative outlook for the country. "Moody's affirmation of Turkey's Baa3 government rating reflects the country's economic resilience and strong fiscal metrics, which have been maintained through the long electoral cycle," the agency said in its last review of Turkey released on Dec. 4.
