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Turkey gets a downgrade from Fitch

Istanbul: Ratings agency Fitch cut its growth forecasts for Turkey, citing slower domestic lending growth and signs that consumer and investor confidence are moderating. It now sees the economy expanding by 2.5 per cent in 2014, compared with a previous estimate of 3.2 per cent, and by 3.2 per cent rather than 3.8 per cent next year.

Turkey targets medium-term economic growth of 5 per cent, which the central bank has said it expects to achieve by mid-2015 after shortfalls in 2012 and 2013. On Friday, Fitch also affirmed Turkey’s credit rating at BBB- with a stable outlook, at the bottom of its investment-grade category.

Fitch said it expected political noise to remain an enduring feature of Turkey ahead of presidential elections in August and parliamentary elections in June 2015. Fitch said Turkey’s economy remained highly volatile, and expected the coherence and predictability of its macro-economic policy to be weaker than in some emerging market peers.

“A material and durable reduction in the current account deficit, coupled with a rebalancing of net capital inflows towards longer-term instruments and a sustained increase in international reserves” could lead to positive rating action, Fitch said. A track record of lower and more stable inflation would also help the country’s rating, it added.