S&P affirms Turkey, Export Credit Bank of Turkey

Standard & Poor's said it affirmed the Republic of Turkey's BB- long-term and B short-term foreign-currency sovereign credit ratings, BB long-term and B short-term local-currency sovereign credit ratings and trAA+ long-term and trA-1 short-term Turkish national scale ratings.

The agency also affirmed the Export Credit Bank of Turkey's BB- long-term and B short-term foreign-currency issuer credit ratings.

The outlook is stable.

S&P said the ratings on Turkey are supported by the government's commitment to prudent macroeconomic policies. Since 2003, the government has consistently achieved its year-end primary surplus target of 6.5% of GNP, and such fiscal discipline has bolstered confidence in government policy, reduced the debt burden substantially (net government debt fell to 52% in 2006 from 73% in 2003) and helped to achieve an unprecedented degree of monetary stability in Turkey.

That said, the severe turbulence in the Turkish foreign exchange market in May and June of 2006, while highlighting Turkey's improved resilience to financing shocks and market volatility, nevertheless served as a reminder of the economy's susceptibility to swings in investor confidence, S&P said, adding that the primary cause of this vulnerability is the large external imbalances that Turkey has been accumulating since 2002. The current account deficit crept to almost 8.5% of GDP in 2006.

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