Dec 13 2017

Outlook negative for Turkish firms on politics, lira: Moody’s

The volatile lira, political risk and uncertainty about economic policy mean the outlook for Turkish firms next year is negative, ratings agency Moody’s said.

"Limited clarity on policy direction and on the pace of implementation of structural economic reforms, as well as political risks and high currency volatility drive the negative 2018 outlook for Turkish companies,” Moody’s said in a report on Turkey, South Africa and the Gulf on Wednesday.

Still, while growth among Turkish corporates next year will be lower than in 2017, most rated companies have a good track record of operating in challenging environments and export firms will benefit, said senior analyst Rehan Akbar.

“Export-oriented manufacturing companies in Turkey will see growth opportunities as demand in Europe increases, supported by a weaker lira,” Akbar said. “Companies in the tourism, hospitality and aviation sectors will be buoyed by improvements in the security situation, but the environment will remain potentially volatile.”

In South Africa, the fragile macro environment as well as political and policy uncertainty heighten downside risks for companies, Moody's said. However, rated firms will remain resilient -- but not immune -- largely thanks to diversification, market dominance, and healthy credit profiles, it added.