A prominent credit rating agency, Moody's, has revealed in a report that Turkey
faces possible economic risks following the increased insurgency in Iraq,
highlighting an expected decrease in Turkish exports and upwards pressure on
inflation rates due to a rise in oil prices.
However, some Turkish economists have rejected Moody's unfavorable predictions
which could foreshadow a negative rating announcement in August; Turkey’s
rating is currently Baa3.
The crisis in Iraq, generated by the Islamic State of Iraq and Levant-led campaign,
will constitute a downward risk to Turkey in its current account deficit, growth and
inflation, Moody's said on Monday, estimating that 15 percent of Turkey's exports
– nearly three percent of its GDP – will be at risk.
The Turkish Exporters’ Assembly said on Tuesday that exports to Iraq fell by more
than 20 percent in June, when the Sunni rebellion began and took the country's
second-biggest city Mosul on June 10.
Iraq is Turkey’s second-biggest export market, worth US$12 billion and accounting
for eight percent of Turkey's overall exports. Trade mainly flows with the Kurdish
region of the country, which is relatively stable.
Arfi Unver, the head of the Association of Capital Market Investors, called the
report non-objective, criticizing it for focusing on the negative while ignoring
favorable developments, describing it as ‘perception management’.
Unver added that the local market participants saw overlooking these improving
developments as “insincere”.
An economic expert from Gazi University, Leven Yilmaz, said rating agencies’
prospects over developing countries often failed to be accurate. He said both local
and foreign investors lost confidence in them and accused Moody's of failing to
foresee the financial crisis in 2008 that hit some European countries.
Yilmaz also said he was confident that the August rating by Moody's will be
revised, even if it was still negative adding that agency’s Monday report missed the
launch of Kurdish oil shipments through Turkish pipelines and Ankara’s growth
rate of this year's first quarter.
In other developments, the Brent crude oil prices soared to US$114 per barrel
following the crisis in Iraq on June 19; however, they went back down to US$110 on
Turkey grew 4.3 percent in the first quarter of 2014, a figure that beat the
estimations. The World Bank upgraded its 2014 growth forecast for Turkey to 3.5
percent from 2.4 on June 11.
Turkey's current account deficit fell to US$56.6 billion in April 2014, from US$65.1
billion in the end of the last year, a significant development on Turkey's worrying
trouble due to energy dependence.
Moody's foresees a continuing decrease to US$46 billion by the end of 2014.
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