Jun 18 2018

Fitch cuts Turkey’s growth outlook

Turkey’s economy will probably grow 3.6 percent this year, Fitch Ratings said, lowering its outlook for the country.

Fitch cut its estimate from a previous 4.7 percent, citing reasons including an anticipated reduction in government stimulus, according to Dunya newspaper.

The outlook for emerging markets will continue to be challenging as the U.S. Federal Reserve is expected to raise interest rates a total of four times this year and three times in 2019, Fitch said in its latest analysis of economic developments.

The markets will be less forgiving of monetary policy mistakes as pressure on currencies persists, Fitch said, according to Dunya.

Fitch is the only ratings agency keeping Turkey’s debt at investment grade. Standard & Poor’s and Moody’s have both cut their ratings in recent months citing lack of clarity over monetary and economic policy and the increasing influence of President Recep Tayyip Erdoğan over decision-making.

Turkey’s lira has slumped to successive record lows this year, forcing the central bank to raise interest rates by a total of 500 basis points to 17.75 percent.

Yigit Bulut, Erdoğan’s senior economic adviser, said on Monday that Turks should take advantage of a financial amnesty and invest their money in Turkish assets so that they don’t miss out on more economic growth after presidential and parliamentary elections on Sunday.

The lira gained 0.3 percent to 4.72 per dollar at 5 p.m. in Istanbul. It reached its last record low of 4.92 per dollar in May after Erdoğan said he’d take more control of economic policy and lower interest rates should he win the election. Erdoğan is leading his political rivals in opinion polls.