Credit rating agency S&P confirmed Turkey's rating and outlook as "B +" and "stable" as expected, on Friday. The organization estimated GDP at 3.6%, inflation at 12.5% and unemployment at 13.4% for 2021. The growth forecast includes a serious revision against the forecast of 3.3% contraction in July. Despite the Covid-19 outbreak in 2020 Turkey’s economy estimated to be grown by 0.9%, as it was noted that the widening macroeconomic imbalances, current account deficit / GDP estimated to rise to 5.4% level, the weakening of foreign exchange reserves and high inflation cause risks. S&P stated that recent decisions to tighten monetary policy signal a return to a more traditional policy. "Stable" outlook refers to ongoing risks of Turkey's accumulated economic imbalances and take into account the impact of the pandemic over the next 12 months. S&P, under the current account deficit and the slowdown in inflation expectations conditions, predicts the economy will continue to recover in Turkey. As a negative scenario; Risks in the banking sector are highlighted. Although it is not a basic scenario; This could be the basis for a possible downgrade if banks' access to foreign funding decreases or if residents persistently convert their savings into foreign currency. The weakening asset quality following the large-scale credit incentives of 2020 is the most significant negative impact on the banking system. On the positive scenario side; Turkey's balance of payments position, especially if the net foreign exchange reserves of central banks, including shows a stronger than expected recovery, said it will be a reason for a possible rating upgrade action. This could be happen with, for example, a lower current account deficit with a strong recovery on exports of goods and services and tourism revenues. This also may happen if domestically resident dollarization and increasing non-monetary gold imports reverse. At the same time, the predictability of general economic policies and the continuous increase in the effectiveness of monetary policy may be subject to a possible rating upgrade. Large-scale credit incentives implemented in a certain period of 2020 were the source of the positive growth on an annual basis, but also led to an increase in macroeconomic imbalances such as a higher current account deficit, decreasing foreign exchange reserves and high inflation. In this context, especially the increasing inflationary pressures caused the Central Bank to tighten its monetary policy, and while the CBRT simplified its policy set, it provided a positive real interest rate against inflation with cumulative increases in the policy rate. While the policy rate has been increased by 675 basis points in total in the last three months of 2020, previous regulations that encourage banks to lend are removed at the same time scale. The aim of the current policy base is to decrease inflation, decrease the current account deficit and strengthen reserves. Tightening demand conditions and reduced credit growth will limit growth in the first 3 months of the year, but vaccination and containment of the epidemic will be determinant in terms of economic growth in the medium term. Turkey suffered a loss close to 30 billion USD from tourism revenues in 2020, due tot he outbreak; and we will look for how much of this balance will turn positive in 2021. In the second half of the year, it is expected that inflation will decline due to factors such as the favorable base effect of inflation, the easing of food inflation due to the improved seasonal conditions and the decrease in the pressure on the exchange rate. We think that even if the decline in inflation will provide the Central Bank a room to lower interest rates, the tight policy should not be abandoned quickly. Overall, weighted market forecasts are now concentrated in the 10-11% range, while S&P predicts inflation at 12.5% by the end of the year. Tera Yatırım
Hibya Haber Ajansı
Hibya Haber Ajansı