S&P upgrades Turkey's outlook to 'stable'

NEW YORK

Turkey's outlook was revised up to 'stable' from 'negative', global ratings agency Standard & Poor's (S&P) said Friday.

The upgrade reflects the Turkish economy's resilience against regional and domestic risks, as the agency said it believes Turkish policymakers would continue to implement reforms for economic stability.

"Government policy is gradually refocusing on measures to reduce external vulnerabilities, albeit in the presence of weaker growth and moribund private investment, S&P said in a statement.

The country’s internal environment was also considered in the decision to revise the rating. "State of emergency following the coup attempt in July 2016 is likely to remain in place until at least January 2017," it said.

“We factor our expectation of ongoing domestic political volatility -- related to the constitutional reform process, the ending of the Kurdish peace process in mid-2015, and heightened instability along Turkey's southeastern border with Syria -- into our ratings at the current level.”

Public and private consumption in Turkey have been the major driver of GDP growth so far this year, according to S&P, and it also pointed to the government's Private Pension System (PPS) that tries to lower the economy’s dependence on foreign financing.

"The government projects the regulation will create 6.7 million contributors to the PPS and 90 billion Turkish lira (4 percent of 2016 GDP; about €26 billion) of savings in 10 years," it noted.

Turkey's foreign and local currency credit ratings. meanwhile, remained unchanged at 'BB' and 'BB+', respectively.