Large investment funds, including pension funds, are waiting for a possible hike in Turkey’s credit rating before pouring billions of dollars in to the country, says Karagöl, a Turkish economistAt least $30 billion in foreign investment will enter Turkey every year, if the country is elevated to investment-grade status by credit rating agencies, according to Professor Erdal Tanas Karagöl, economics director for the Foundation for Political, Economic and Social Research (SETA).
Some rating agencies could soon raise Turkey to investment-grade status, according to media reports. International rating agency Fitch Ratings could reconsider Turkey’s “BB” rating next month, Fitch Ratings Director Paul Rawkins recently said. “According to EUguidelines we need to evaluate a country’s credit rating once every year,” he told Anatolia news agency.
Many large international investment funds, particularly pension funds, have been watching for an opportunity to invest in Turkey, but have not been able to utilize investment opportunities as the country does not have investment grade status, Karagöl told the Anatolia news agency.
“Those funds’ guidelines say a country should have investment-grade status in order to make investments in that country. So for now they cannot come to Turkey, although they want to,” Karagöl said. “One of the major issues in Turkey’s economy is how to finance the current account deficit, if it expands. If Turkey’s credit rating is improved, this problem will disappear to a large extent. If the country is elevated to investment grade, at least $30 billion in foreign investment will enter Turkey every year, and the government’s borrowing costs will fall,” Karagöl said. “When funds begin to pour their money into Turkey after the rating is raised to investment grade, the Treasury will be in a stronger position to find low-cost loans.”
In a recent statement, senior analyst Sarah Carlson of Moody’s revealed the criteria for a possible credit rating upgrade. “If Turkey reduces its structural current account deficit, and makes progress in decreasing external vulnerabilities by increasing its currency reserves or decreasing private-sector debts, then Moody’s will asses to increase Turkey’s credit rating,” she said, according to daily Hürriyet. Moody’s increased Turkey’s previous Ba2 credit to Ba1, which still defines Turkey as “judged to be speculative and subject to credit risk,” in June.
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