Standard & Poor's: Turkey’S Credit Path Heading Town

– Turkey’s credit path is heading down and diverging from Indonesia’s path, as the country has a negative outlook in terms of creditworthiness, regarding the policy trends profiling a weaker external image.

According to the international ratings company Standard & Poor’s, “for all the similarities the countries share, Turkey and Indonesia are heading in opposite directions in terms of creditworthiness, chiefly because of policy trends”.

Moreover the company suggests, “Although both sovereigns are vulnerable against shifts in global liquidity and investor sentiment, Turkey's much weaker external profile makes it more susceptible to an accelerated redirection of capital flows from emerging economies to advanced ones.”

The recent report of the international ratings company indicates both countries’ rates as 'BB+', however Turkey marks a negative outlook, against the positive outlook on Indonesia as policy trends have been worsening in Turkey but gradually improving in Indonesia.

The long-term rating on Turkey has been stable in early 2014 as Indonesia was also stable in May 2015. The ratings of both countries shifted to different paths.

“Turkey's higher external indebtedness and larger financing needs make it more sensitive than Indonesia to shifts in investor sentiment” suggests the company, in this regard.

Although rated at the same level, Turkey and Indonesia have fundamental differences, according to the report.

“Turkey and Indonesia have low levels of general government indebtedness relative to other sovereigns in their rating category, flexible exchange rate regimes, and young and fast-growing populations. Still, Turkey is a middle income country, whereas Indonesia's income levels are low and growing only modestly, implying far greater development needs, and therefore, a larger claim on government finances” says the report, estimating Indonesia's GDP per capita at 3,600 in 2015, 60 percent lower than estimated 9,600 dollar for Turkey.

“The differing degrees of development strongly influence the nature of reforms needed in each country to deliver sustainable growth. For instance, Indonesia has a more pressing need to address critical transport and energy infrastructure shortfalls to raise its growth potential, whereas we think Turkey could derive sizable benefits from agricultural sector reform” underlines the rating company.

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