Azernews.Az

By Bloomberg

Fitch Ratings said before its review of Turkey’s credit rating next month that a possible tightening of U.S. monetary policy this year may test the resilience of the Turkish economy to external shocks.

“External financing has been resilient to shocks in recent years and Turkey has not experienced a sudden stop of capital inflows,” said the report, signed by senior director Paul Rawkins and dated Feb. 12. “Nevertheless, this resilience may be tested in 2015, by U.S. monetary policy tightening or geopolitical risks, which are already being felt in the sharp fall in exports to Russia, Ukraine, and Iraq.”

While Turkey reduced its current-account deficit by nearly 30 percent in 2014 from the previous year, the “durability” of the re-balancing will be key to an assessment of its sovereign credit rating, Fitch said. The next review is scheduled for March 20. Fitch kept Turkey at its lowest investment-grade level of BBB-, with a stable outlook, in its last ratings review in October.

Turkey’s current-account gap and reliance on external financing still leave the nation “vulnerable to shifts in investor sentiment,” the report said. Turkey’s susceptibility to changes in investor sentiment is visible in recent volatility in the lira, Fitch said.

The Turkish currency dropped to successive records this month and was trading 0.3 percent weaker at 2.4735 per dollar at 9:25 a.m. in Istanbul on Feb. 13. It has dropped 5.6 percent this year, the third worst performance among 24 major emerging market currencies tracked by Bloomberg.