Moody's: Turkey reforming but concerns linger

Moody's Investors Service said it expects the newly re-elected government of Turkey to press forward with economic and political reforms but warned of uncertainty about the upcoming presidential election and the government's reaction to national security threats, as well as lingering structural economic concerns.

The outlook is stable on the Turkish government's Ba3 foreign- and local-currency debt ratings.

"On balance, the election outcome portends a renewed effort to modernize the Turkish economy," said Moody's vice president Kristin Lindow. "Although opposition parties now control more parliamentary seats than before, a more unified and progressive AK Party has a fresh mandate after having won nearly 50% of the popular vote, and thus could prove a more effective legislative force."

Large external deficits are among Moody's lingering concerns in the longer term, and higher oil prices are likely to cause these deficits to widen further than previously expected, but the financing coming from foreign direct investment is expected to cover a substantial portion of the current account shortfall in the near term, Moody's said.

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