S&P: Turk's AKP's closure not to affect rating

"We look for trust and stability when we are planning for an increase in credit rating, but this does not mean the negative outlook based on these criteria will lead directly to a decrease of a credit rating," Soussa said on Tuesday. "The closure case against the ruling Justice and Development Party (AKP) is not seen as sole criteria to decrease the rating," he added.       Â

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Turkey's top prosecutor filed a lawsuit against the ruling AKP in March and the Constitutional Court will begin hearing the case in the first week of July.Â

 

The political uncertainty that emerged after the closure case was filed against the AKP is seen as a negative factor for foreign investors amid global credit crunch, Soussa said. "Political uncertainty is likely to take us (Turkey) back to 2007," he said, stressing negative signals have already started to appear in the balance of foreign financing.

 

Soussa said Turkey’s failure to clarify how it will finance the current account deficit increases the risk of the country’s ability to finance it. "We can see some balances changing in regard to foreign financing, but if the balance were to continue as it has until now, there would be no need to decrease the credit rating," he added.

 

Turkey attracted a total of $21.9 billion of foreign direct investments (FDI) in 2007. Turkey adjusted an earlier estimate of $25 billion in FDI in 2008 and expects to attract $13 billion by end-year.

 

Economists expect Turkey’s current account deficit to reach a record $50 billion by end-year.

 

Soussa also supported the central bank's latest move to increase key interest rates. "The central bank's move to raise interest rates was the correct step," adding they were estimating the inflation rate to be 10 percent, the growth rate to be 4-4.5 percent and the current account deficit to be below last year's figures at the end of 2008.

 

The Turkish Central Bank raised its key interest rate by 50 basis points from 15.75 percent to 16.25 percent as expected on Monday. The central bank said the hike in interest rates was due to the ongoing perceptions of uncertainty and supply shocks that were causing upward risks to inflation.