Doubts over Turkey’s fiscal policies could risk credit rating

A hung parliament in Turkey could increase tensions over economic policy, Fitch Ratings has said in a statement. Financial policy making could increase the risk to the country’s credit rating, the statement said, late on Monday.

The ruling Justice and Development party (AKP) lost its majority by 18 seats short of the required 276.

Newly formed Peoples’ Democratic Party (HDP) won 13% of the votes and acquired 80 seats, for the first time gaining representation in parliament. Main opposition Republican People’s Party (CHP) won 25% and 132 seats, while the Nationalist Movement Party (MHP) won 16% and 80 seats, according to unofficial results until the country’s election board announces the final results.

Fitch speculated that because “The HDP and MHP have said they will not join an AKP-led government, although this could change after negotiations; the AKP could try to govern as a minority with the support of either the HDP or the MHP.”

 A CHP-MHP-HDP coalition appears unlikely due to antipathies between the MHP and HDP. Fresh elections can be called if a government is not formed within 45 days, meaning that political uncertainty could drag on,” it added.

“The election heightens uncertainty about economic policy and personnel that had emerged before Sunday’s vote,” Fitch said, as slowing GDP growth had increased tensions regarding efforts to rebalance the economy, cut reliance on net capital inflows and lower inflation.

Fitch affirmed Turkey’s rate at BBB-/Stable rating on 20th March.

However, Standard & Poor’s was more positive, saying the outcome of Turkey’s general election had no immediate impact on its BB+ sovereign credit ratings on the country.

It said in a statement on Monday that its current negative outlook on Turkey’s ratings reflected its view of the fiscal risks coming from doubts about . It said it could revise the outlook to “stable” if growth continued to rebalance and depended less heavily on external borrowing.


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