Fitch's rating for Turkey expected to be left unchanged

By Nuran Erkul

ANKARA

For Fitch's anticipated rating announcement for Turkey on August 19, the president of Turkey's Prime Ministry Investment Support and Promotion Agency (ISPAT) expects that it will use more time to assess the impacts of July 15 coup attempt and leave the rating unchanged at "investible."

Fitch credit rating agency in February confirmed Turkey's long-term foreign and local currency issuer ratings as 'BBB-' and 'BBB' respectively, with a stable outlook.

Fitch Ratings' long-term credit ratings are assigned on an alphabetic scale from 'AAA' to 'D' with the use of +/− modifiers for each category between AA and CCC. The 'BBB' investment grade is defined as middle class and an acceptable risk.

"The issue ratings on Turkey's senior unsecured foreign and local currency bonds have also been affirmed at 'BBB-' and 'BBB' respectively, while the country ceiling has been affirmed at 'BBB' and the short-term foreign currency at 'F3'," Fitch said in its February statement.

"I expect that Fitch will use more time to be able to assess the impacts of the coup attempt and give a healthy decision on our ratings. For this reason I expect that the agency will not announce any negative statement for Turkey on August, 19," Arda Ermut, president of ISPAT told Anadolu Agency.

He noted that Fitch was the first institution to rate Turkey as "investible" in November 2012.

He explained that the government's decreasing burden of debt, strong and functioning financial system, positive growth expectations supported by stable economic sources, were taken into consideration by Fitch in their assessment in 2012.

"Fitch's previous rating for Turkey was in February 2016 when it secured Turkey's ratings and outlook. The outcome of this decision was that Turkey preserved its fiscal discipline, despite the elections of 2015, the jet crisis with Russia last November along with disorder in Iraq and Syria as our neighbors," Ermut emphasized.

At that time, the agency said the AK Party's triumph in elections has "eased domestic political uncertainty."

"Now neither Fitch nor we will ignore the coup attempt, but it is necessary to state that Turkey preserves its fiscal discipline and that there are positive expectations on growth," he said.

He underlined that the recently passed law to bring in new incentives for investments along with regulations on individual retirement plans were among the developments that Fitch said it would follow.

A law which supports improving the investment climate in Turkey by amending certain regulations was published in the Official Gazette on August 9, 2016, and came into force.

The law encompasses 79 articles, 47 of which are related to tax regulations. The most significant amendments include investment incentives, incentives for service exports, incentives for regional management centers, transfer of pricing regulations, exemption for industrial property rights, incentives for energy savings projects and exemptions on stamp duty in certain cases.

He emphasized that Fitch will take all these developments into consideration.

- Coup's economic cost controllable

Ermut asserted that the coup plot will incur costs on the Turkish economy, and added, "However, since Turkey began building its basis on a solid economy since 2002 and diversified its sources, this cost will be controllable."