In return for international credit rating agency Moody's Monday forecast that the Turkish banking sector's profits will be hit significantly by rising non-performing loans in 2017, Turkish officials asserted the contrary, saying Monday that the banking sector will remain strong despite current circumstances.

"We expect asset quality trends to worsen this year, driven by the combination of high inflation, lira depreciation, and the general worsening of the investment climate because of security issues and geopolitical tensions," Moody's said in a report.

The credit agency also said that it expects gross nonperforming loans --in which the debtor has not made payments for at least 90 days-- to be above four percent by the year's-end, "which will require increased provisioning expenses and will reduce banks' profitability."

"Increased nonperforming loans, leading to higher loan loss charges on these segments, would therefore have a significant effect on the profitability of Turkish banks," it said.

The agency, which downgraded the country's credit rating to junk in 2016, forecasts that nonperforming loans would rise above four percent by the end of the year. Turkey's credit rating was lowered to junk status by Standard & Poor's last year, and will face a similar move by Fitch later this month.

Speaking on the issue, Deputy Prime Minister Nurettin Canikli said that the government has already provided the private sector with a 250 billion Turkish lira-worth ($67 billion) credit volume to prevent possible payback problems. Canikli dismissed Moody's prediction that nonperforming loans would exceed four percent.

Canikli added that Moody's is aware of the government's measures on the issue; however, it is trying to build a perception through its predictions in a non-ethical manner.

The Turkish lira, however, previously pounded by higher-than-expected inflation and security fears, hit record lows against the U.S. dollar and the euro on Monday. The lira was down from 2.46 percent to 3.73 against the dollar at 1400 GMT, while the Euro reached a record high of 3.93.

The country's central bank attempted to slam the breaks on the lira plunge in November by raising interest rates for the first time since 2014.

Analysts said the bank may soon have to intervene again.

"While President Erdogan has said that there will be no one-off interest rate increases to try and reverse some of the losses in the lira, we think that this may still happen, particularly if we see further heavy losses of 1-2 percent per day in the coming days," City Index research director Kathleen Brooks said.

LCG senior market analyst Ipek Özkardeşkaya described the situation as "alarming".

"We do not rule out the possibility of a surprise intervention from the Central Bank of Turkey to ease the aggressive sell-off in the lira," she said.

Turkish parliament also started debating Monday the new draft constitution, which seeks a switch to the presidential system amid heated debates.

If passed by parliament, the draft constitution will be put to a public referendum expected to be held around late March or early April, meaning that at least four months of uncertainty awaits the country amid weak signs from the economy.

Official figures released Monday showed that the country's industrial production stalled in November compared to the previous month, despite a rise of 2.7 percent compared to last year.