Fitch released its latest assessment defending a 'stable' outlook rating for Turkey; while fundamentals have mostly deteriorated, except for the current-account gap which has narrowed to c.4.6% of GDP this year, the rating agency notes Turkey's recent record of resilience to shocks.
"Though, this resilience was an illusion fostered by a constant dovish global backdrop, which meant that yield-seeking portfolio capital was always plentiful; but, EM assets have not really been able to settle down since the 'taper tantrums' of mid-2013", says Commarebznk.
For Turkey, the main potentially positive development we see is a constructive political outcome following the 1 November election -- this will likely trigger a sizeable rally near-term.
"But, our forecast remains for continued lira weakness later in 2016 and a concomitantly high inflation rate because of the pass-through. Our 8% inflation forecast for end-2016 is, therefore, significantly higher than Fitch's 6.4%", estimates Commerzbank.
