Tag Archives: Fitch

Financial Analysts Watch Turkish Protestors

14 Jun

Civil unrest in Turkey is causing some concern on the part of credit agencies over whether Turkey will be able to maintain its economic performance.  While Turkish markets have recently rallied in light of Moody’s decision to upgrade the country, anti-government protests have occupied the capital and other Turkish cities for more than two weeks.  Protestors claim the political part in power is moving public policy to favor Islamic law, even though the country is officially secular.  A recent law curbing alcohol sales seems to have been the last straw for the non-religious half of Turkish citizens, and protests have persisted and in some cases become violent.

Rating agency Moody’s, led by Raymond McDaniel, said that the Turkish government will need to act swiftly and effectively to curb the unrest in order to maintain its newly achieved rating of Baa3, because the protests could reduce tourism revenue and thus affect the country’s debt to income ratio.  The protests could also make foreign investors hesitant to bring capital into the country if the government is seen as unstable, which is why agencies are emphasizing the dependence on the government’s reaction to the protests, rather than on the protests themselves.  Overall, both Moody’s and rival agency Fitch said there is no danger of a credit downgrade at this time.

The Turkish economy is performing better than expected this year and has managed to bring unemployment to the lowest rate in seven years.  Inflation is also down and the working class seems to be happy.  So far the protests are isolated to the educated groups of people who are against religious rule, rather than being able to ignite the working class.  Most analysts feel the protests will be controllable and not effect Turkey’s economy.

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Fitch Threatens UK Downgrade

29 Mar

Fitch, one of three major credit rating agencies, has put the UK economy on negative watch. The agency, run by CEO Paul Taylor, says the country’s rising debt and slow growth has put it on track towards a possible downgrade in the near future. The UK was recently downgraded by Moody’s, whose CEO is Raymond McDaniel, another of the big three agencies—that means if Fitch ends up lowering the country’s credit rating as well, things may start to get a bit rocky.

 

“The persistently weak performance of UK growth, in part due to European growth, has increased uncertainty around the UK’s potential output and longer-term trend rate of growth with significant implications for public finances,” Fitch said.

 

The country’s economy shrank by 0.3% in the last quarter of 2012, according to an article from The Guardian, and another dip for the first quarter of this year is a looming possibility. If it does see another loss, that will mean a triple-dip recession. A double-dip recession occurs when a country experiences a second dip, or negative GDP after one or two quarters of growth. A triple-dip recession would be unprecedented in Britain, and brings about fear that the country will move into a “lost decade.”

 

Ed Milibrand, leader of the British Labour Party, claims that the government is to blame for this possibility. “They are shrugging their shoulders, They have run out of ideas, They are resigned to a lost decade,” he said, later emphasizing that having the right leadership in place could help move Britain out of this economic slump.

 

But Lord Mendelson, former business secretary, says it’s about the future and not the past. “Everyone knows we are in a heck of a bad way in the economy. Quite a lot more pain is going to be experienced. What we should be saying is: this is the light at the end of the tunnel. This is where we should be heading,” he says.

 

“We need to explain how we would retool and redevelop our economy. We need a politician who will fight on that rather than fight about the past or fight over what is fair and what is not fair.”