Fitch: “Turkey needs more struggle to reduce uncertainty.”

Fitch

Mehmet Şimşek, who has retaken the captain’s seat of the economy, had sent a message of determination to return to orthodox policies.

Evaluating the practices of the new economic management, which implemented interest rate hikes twice in June and July, the International Credit Rating Agency Fitch stated that it is consistent with the target of returning to a rational monetary and fiscal policy. However, Fitch also highlighted that due to the decision for a gradual approach, policymakers might face challenges in restoring investor confidence and reducing uncertainty.

In the evaluation released by Fitch on Friday night, it was stated that given the (economic management’s) gradual approach to normalization by removing the regulations that disrupt monetary conditions and markets, and the fact that political reasons led to the abandonment of past policies, officials may face challenges in re-establishing investor confidence permanently, reducing macro-financial risks, and mitigating external vulnerabilities.

Fitch also pointed out that President Tayyip Erdoğan’s views on policy interest rates and the existing political calendar, including the local elections scheduled for March 2024, could limit the scope of a “decisive” sharp change in monetary and fiscal policy.

The rating agency highlighted that Ankara’s past sudden changes in monetary and fiscal policy, premature easing of monetary policy, and constant changes in the management of the central bank could take time to permanently reduce uncertainty.

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