Fitch: Turkey Sovereign Risks Remain Broadly Balanced

International ratings company Fitch announced that Turkey's sovereign credit profile continued to mix high exposure to global financial market conditions and other structural weaknesses with strong public finances and a record of resilience to recent external shocks.

This statement was reflected on Turkey's 'BBB-' rating in the Stable Outlook, which was affirmed by the company last month.

"Very large external financing requirements that expose Turkey to shifting investor sentiment remain a potential source of risk" said the statement, adding that Turkey's external liquidity has been weaker than for ratings category peers, with the international liquidity ratio of 70.3 percent less than half the 'BBB' median of 146.3 percent.

On the other hand, there has been no 'sudden stop' of capital during bouts of market volatility since the 2008 global financial crisis, Fitch's statement added.

The announcement of Fitch underlined, "Turkey's low government debt/GDP is a key support for the rating. Debt/GDP is forecast at 35.3 percent in 2015, below the 'BBB' median (42.7 percent), with the former expected to fall over the next two years while the latter rises".

"Lack of structural reform"

While the Fitch announcement forecasted the current account deficit to narrow to 4.6% of GDP this year from 5.8 percent in 2014, it underlined this was largely due to lower oil prices, rather than structural gains in competitiveness or domestic savings.

"There is little indication that Turkey is achieving a better mix of current account financing, for example via higher foreign direct investment. The importance of consumption to GDP growth and persistently weak investment also points to a lack of structural reform" the statement urged. - Istanbul