ISTANBUL
Turkey's economic potential is high but the biggest challenge that it faces is external vulnerabilities, Sarah Carlson, Vice President and Senior Credit Officer at Moody's told on Tuesday.
"We believe Turkey's economic potential is high. It is higher than South Africa's potential but is lower than Brazil and China," Carlson told at the Moody's 7th Annual Turkey Credit Risk Conference held at the Ciragan Palace in Istanbul.
"Turkey's biggest challenge is external vulnerabilities. Current account deficit is part of that. As we say in the report that we think sovereign balance sheet is robust enough to be able to cope with. But it is certainly the biggest challenge," she emphasized.
In a report released on Monday, Moody's announced that Turkey's Baa3 government bond rating is primarily underpinned by the diversification and dynamism of its economy, now the world's 17th largest, and the government's robust balance sheet and track record of prudent fiscal policy.
It said that the rapid growth in Turkey's economy over the last decade had been driven by a number of factors, including generally favourable domestic and external economic conditions and reform of the financial sector and political institutions.
Moreover, the Turkish government's recent policy reforms designed to structurally reduce external vulnerabilities have helped the country improve its shock-absorption capacity and were key drivers of our decision to upgrade Turkey's sovereign rating to Baa3 in May 2013, the report added.
In regards to the effects of the bond-buying reduction, Carlson stated the direct effect of it would be very little on Turkey but there would be indirect effects.
"They will be manageable risks in the long term. Some assurances have been created since 2009. All of these are reducing the risks of bond-buying," Carlson said.
Moody's analyst also mentioned that Turkey's public finance power has increased in the last 10 years. "One of the main reasons behind Turkey's being increased to a level of investible is country's shock-absorption capacity," she added.
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