Turkey’s current-account deficit may be “forcibly narrowed” by slower economic expansion in the country, Standard & Poor’s said.
Turkey’s economy may expand by 2 percent to 3 percent next year, which would mean growth-per-capita of “close to zero,” Frank Gill, a London-based analyst with S&P, said in a telephone interview. The ratings company lifted Turkey’s local-currency debt rating by one level to BBB-, the lowest investment-grade ranking.
“Generally what you get after credit-driven growth, you get a sharp slowdown and that affects the government’s balance sheet,” Gill said. Turkey’s current-account gap, largely funded by debt inflows rather than foreign direct investment, may be “forcibly narrowed,” he said.
Turkey’s foreign-currency ranking was affirmed at BB with a positive outlook, S&P said today in a statement.
“What we’re looking for is further evidence that this economy can grow without generating large external imbalances which pose a risk to the economy,” Gill said.
Turkey’s economy expanded 8.8 percent in the second quarter as a boom in consumer borrowing forced the government to cap loan growth at 25 percent. The country’s 12-month current- account deficit widened to a record $74.6 billion in July, about 10 percent of gross domestic product.
“We still think the economy is quite resilient, we think they’ll manage through this,” Gill said.
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