Fitch affirms Turkey rating; outlook revised to negative

NEW YORK

Turkey's credit rating is affirmed at "'BBB-", but its outlook revised to "negative" from "stable," Fitch Ratings said Friday.

The country has "heightened risks to political stability”, the global rating agency said while pointing to a failed coup attempt last month that Ankara has blamed on by Fetullah Terror Organization and its leader Fetullah Gulen.

Since the July 15 defeated putsch, the government has arrested and or detained members of the Gulen group who are employed in state institutions, leading Fitch to believe detentions caused “uncertainty over capacity and continuity”.

The agency added, however, that "the overwhelming public opposition to the coup attempt and subsequent unity of most political parties could lessen political fractures."

Turkey's economy is forecast to grow 3.4 percent this year, according to Fitch, which said it does not expect the "fiscal stance to weaken in response to the coup attempt."

Noting that lower oil prices narrowed Turkey's current account deficit, Fitch said it anticipates the deficit to fall to 4.3 percent of GDP in 2016.

While there is a continued commitment to fiscal stability in Turkey, Fitch "economic relations with key trading partners will not deteriorate seriously."

Fitch said terrorist attacks in Istanbul and Ankara in recent months had a negative effect on Turkey's tourism industry, noting revenues from foreign tourists were down 41 percent in the first half of 2016, compared to same period last year.

The agency stressed a recent rapprochement with Russia could provide support for Turkey's tourism sector.

But "prospects for significant structural reform that would shift the structure of growth from private consumption have diminished in Fitch's opinion," it added.