Striking assessment from Fitch on the Turkish economy: 'There are steps that need to be taken...'

Fitch Ratings held an online panel to discuss the credit rating agency's upgrade of Turkey's credit rating and its impact on banks, non-bank financial institutions, international public finance, and corporations in Turkey.

Speaking at the panel, Morales stated that vulnerabilities in the Turkish economy are decreasing and the contraction in the current account deficit is continuing.

Morales noted that the decline in Turkey's energy and gold imports is reflected in the current account deficit, and said that international reserves have risen back to the levels seen at the beginning of March.

'THERE ARE STEPS THAT NEED TO BE TAKEN'

On the other hand, expressing that the main policy challenge in Turkey currently is inflation, Morales said, "As we have stated before, we have more confidence in the continuation of economic policy, and we have seen other signs of commitment to this policy direction. In March, we saw the Central Bank of the Republic of Turkey (TCMB) make an unexpected increase in the policy rate and that the political authority approved the economic program after the elections. From here on, we need to see to what extent policies will be tightened further to reduce inflation in a sustainable manner. Therefore, there are steps that need to be taken not only on the monetary policy side but also at other policy levels to support the disinflation process and the work of the TCMB."

Lindsey Liddell, Head of Fitch's Emerging Market EMEA Bank Ratings, stated that the return to orthodox economic policies and the tightening of monetary policy, as well as the simplification of macroprudential regulations, have helped alleviate pressures on banks.

Noting that they have observed a large increase in issuances by Turkish banks in recent months, Liddell also noted that some risks remain for banks.

Ahmet Kılınç, Director of Banks at Fitch Ratings, Nilay Akyıldız, Director of International Public Finance, Levent Topçu, Director of Non-Bank Financial Institutions, and Paul Lund, Head of the EMEA Industrial Ratings Group, also provided assessments during the panel.

News Source: AA