ID :
175711
Fri, 04/15/2011 - 22:02
Auther :
Shortlink :
https://oananews.org//node/175711
The shortlink copeid
Standard & Poor's affirms Turkey's rating
ANKARA (A.A) - 15.04.2011 - Standard & Poor's Ratings Services said Friday that it had affirmed the Republic of Turkey's 'BB/B' foreign currency sovereign credit ratings.
A statement by S&P's said that it affirmed foreign currency sovereign credit ratings of Turkey and the outlook remained positive.
"The ratings on Turkey reflect its strong recovery in GDP growth to just below 9% in 2010. This has occurred on the back of an increase in Turkey's external imbalances, as the current account deficit widened to an estimated 6.6% of GDP last year compared with 2.3% in 2009 and an average of just under 5.0% between 2003 and 2008. Weak external competitiveness remains the major constraint on Turkey's ratings. The country's large gross external financing needs represent a macroeconomic risk, in our view, because a change in investor sentiment could weigh on economic growth and public finances. Turkey's low level of prosperity also constrains its ratings, as does the substantial size of the informal non-tax-paying economy," it said.
"In our opinion, however, Turkish institutions are robust enough to manage any sudden reversal in capital inflows; our positive outlook on the ratings reflects this view. Overall, and despite the rapid acceleration in credit growth during 2010, we consider the Turkish banking sector to be well regulated and well capitalized. This helped Turkish banks to maintain better access to global financial markets in 2008-2010, compared with many peer banking systems," the statement said.
Standard & Poor's said, "In our view, the system's loan-to-deposit ratio of 90% at end-March 2011 confirms low leverage of the household sector, in contrast to many Eastern European systems. Nevertheless the loan-to-deposit ratio has increased significantly from its end-2009 level of 81%. Narrow net external debt levels were 113% of current account receipts (CARs) at end-2010, above 2009 levels of just under 100%, as debt increased more rapidly than Turkish exports. We expect gross external financing needs over CARs and usable reserves to increase to about 140% by 2013. Gross debt inflows into the financial sector during 2010 equated to 3.7% of GDP or just under half of the financial account surplus. Just over one half of this additional lending came from foreign parents of Turkish banking subsidiaries; these account for roughly one quarter of system assets (excluding non-deposit financial institutions). Because nominal GDP increased nearly 20% in U.S. dollar terms during 2010 (versus a 17% decline in nominal U.S. dollar-denominated GDP in 2009), gross external debt to GDP actually declined to 40% of GDP in 2010, compared with 44% in 2009. Were there a sudden and unexpected reversal in capital inflows over the next few years, this denominator effect could work in the opposite direction via the exchange rate and real GDP--albeit far less than in the past given that 73% of general government debt stock is local currency denominated (nonresidents hold 12.5% of local currency government securities at end-2010)."
"We anticipate that policymaking will remain sufficiently prudent to ensure further declines in general government debt to GDP to below 40% of GDP by 2012, under our baseline assumption that GDP growth will average slightly below 5% between 2011 and 2013, versus 8.9% in 2010, and that the underlying fiscal position will gradually tighten after the general elections in June. We expect the 2011 budget deficit to narrow to at least 2.8% of GDP versus 3.7% of GDP in 2010 given robust domestic demand and the receipt of extraordinary inflows from lowering the government's back-interest payments and fines on overdue social security premiums, and other past-due tax liabilities. We project the primary surplus in 2011 will slightly exceed 1% of GDP. Although the government passed significant plans to overhaul the pension system in 2008, we believe the impact on public finances will only be gradual. Given the high replacement rate and delays in increasing the average retirement age, we expect social security deficits to remain sizable over the next five years, despite the fiscal benefits of having a young and growing population. Meanwhile, we consider central government tax administration to be suboptimal, suggesting a potential revenue gain of at least 2% of GDP should anti-evasion efforts be intensified. We would consider raising the rating if we saw evidence that Turkey depended less on its current growth model of net external debt inflows," it said.
A statement by S&P's said that it affirmed foreign currency sovereign credit ratings of Turkey and the outlook remained positive.
"The ratings on Turkey reflect its strong recovery in GDP growth to just below 9% in 2010. This has occurred on the back of an increase in Turkey's external imbalances, as the current account deficit widened to an estimated 6.6% of GDP last year compared with 2.3% in 2009 and an average of just under 5.0% between 2003 and 2008. Weak external competitiveness remains the major constraint on Turkey's ratings. The country's large gross external financing needs represent a macroeconomic risk, in our view, because a change in investor sentiment could weigh on economic growth and public finances. Turkey's low level of prosperity also constrains its ratings, as does the substantial size of the informal non-tax-paying economy," it said.
"In our opinion, however, Turkish institutions are robust enough to manage any sudden reversal in capital inflows; our positive outlook on the ratings reflects this view. Overall, and despite the rapid acceleration in credit growth during 2010, we consider the Turkish banking sector to be well regulated and well capitalized. This helped Turkish banks to maintain better access to global financial markets in 2008-2010, compared with many peer banking systems," the statement said.
Standard & Poor's said, "In our view, the system's loan-to-deposit ratio of 90% at end-March 2011 confirms low leverage of the household sector, in contrast to many Eastern European systems. Nevertheless the loan-to-deposit ratio has increased significantly from its end-2009 level of 81%. Narrow net external debt levels were 113% of current account receipts (CARs) at end-2010, above 2009 levels of just under 100%, as debt increased more rapidly than Turkish exports. We expect gross external financing needs over CARs and usable reserves to increase to about 140% by 2013. Gross debt inflows into the financial sector during 2010 equated to 3.7% of GDP or just under half of the financial account surplus. Just over one half of this additional lending came from foreign parents of Turkish banking subsidiaries; these account for roughly one quarter of system assets (excluding non-deposit financial institutions). Because nominal GDP increased nearly 20% in U.S. dollar terms during 2010 (versus a 17% decline in nominal U.S. dollar-denominated GDP in 2009), gross external debt to GDP actually declined to 40% of GDP in 2010, compared with 44% in 2009. Were there a sudden and unexpected reversal in capital inflows over the next few years, this denominator effect could work in the opposite direction via the exchange rate and real GDP--albeit far less than in the past given that 73% of general government debt stock is local currency denominated (nonresidents hold 12.5% of local currency government securities at end-2010)."
"We anticipate that policymaking will remain sufficiently prudent to ensure further declines in general government debt to GDP to below 40% of GDP by 2012, under our baseline assumption that GDP growth will average slightly below 5% between 2011 and 2013, versus 8.9% in 2010, and that the underlying fiscal position will gradually tighten after the general elections in June. We expect the 2011 budget deficit to narrow to at least 2.8% of GDP versus 3.7% of GDP in 2010 given robust domestic demand and the receipt of extraordinary inflows from lowering the government's back-interest payments and fines on overdue social security premiums, and other past-due tax liabilities. We project the primary surplus in 2011 will slightly exceed 1% of GDP. Although the government passed significant plans to overhaul the pension system in 2008, we believe the impact on public finances will only be gradual. Given the high replacement rate and delays in increasing the average retirement age, we expect social security deficits to remain sizable over the next five years, despite the fiscal benefits of having a young and growing population. Meanwhile, we consider central government tax administration to be suboptimal, suggesting a potential revenue gain of at least 2% of GDP should anti-evasion efforts be intensified. We would consider raising the rating if we saw evidence that Turkey depended less on its current growth model of net external debt inflows," it said.
