Fitch: Uncertainty continues in the Turkish economy

The Fitch credit rating agency said: “Turkey continues to change its economic policy, but the gradual change fails to reduce uncertainty.”

He noted that the central bank’s second rate hike last week was in line with the new economy team’s goal of returning to rational monetary and fiscal policy, but that this approach, which was decided to be gradual, may struggle to restore investor confidence and reduce uncertainty.

AUTHORITIES MAY BE FORCED

Officials may find it difficult to permanently restore investor confidence, mitigate risks to macrofinancial stability and mitigate external vulnerabilities, Fitch said in an assessment released late Friday.

The note stated that market-distorting monetary conditions and regulations were gradually approaching normalization with the removal of regulations, and that policies implemented in the past were abandoned for political reasons, increasing these risks.

‘LOCAL ELECTIONS LIMIT CHANGE’

Fitch asserted that President Tayyip Erdogan’s views on the policy rate and the existing political calendar, including the March 2024 local elections, may limit the scope for a “decisive” abrupt change in monetary and fiscal policy.

Fitch noted that it will take time to permanently reduce uncertainty, as Ankara has abruptly changed its mind on monetary and fiscal policy in the past, eased monetary policy prematurely and made constant changes to central bank management. (Reuters)