Fitch: Referendum may give space for economic reforms

Published 18.04.2017 23:26
Updated 20.04.2017 13:55

The U.S.-based credit rating agency Fitch announced Tuesday that Turkey's referendum may pave the way for the necessary economic reforms now that the political environment has been stabilized.

"Turkey's referendum but may facilitate a revival of credit-positive economic reforms," Fitch Ratings said.

Earlier this year, Fitch downgraded Turkey's sovereign rating to BB+/Stable reflecting, among other things, the erosion of checks and balances and institutional independence in Turkey in recent years.

The credit rating agency highlighted that at the time of the downgrade, Fitch assumed the constitutional amendments would be approved.

"The referendum may complete an extended political cycle now that new presidential and parliamentary elections are not required until late 2019. This timeframe should allow the economy to move back up the ruling Justice and Development party (AK Party)'s policy agenda," the statement noted.

A better-than-expected 4Q16 and outturns mean growth was stronger than forecast.

The statement also cited Deputy Prime Minister Mehmet Simsek's anticipation that the referendum that the removal of political uncertainty would enable the government to "accelerate reforms starting May 2017" to improve Turkey's investment environment and the tax system.

In its release, Fitch also drew attention to the successful economic reform during the first half of Erdogan's rule. It read that the government may also loosen fiscal policy to lift growth.

"The relative weight given to different policy options and their success in promoting stable and sustainable growth will be an important part of our sovereign rating assessment. Implementation of reforms that address structural deficiencies and reduce external vulnerabilities is a positive rating sensitivity," the agency concluded.

The agency is scheduled to review Turkey's sovereign rating is due on 21 July 2017.

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