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UPDATE 1-Turkey's snap election will prolong doubts, damage economy -Moody's
August 27, 2015 / 1:57 PM / 2 years ago

UPDATE 1-Turkey's snap election will prolong doubts, damage economy -Moody's

(Adds quotes, details)

ANKARA, Aug 27 (Reuters) - Turkey’s snap elections due in November will weigh on its credit rating by prolonging political uncertainty and strengthening headwinds for an already bruised economy, ratings agency Moody’s said on Thursday.

Turkey is facing new national polls on Nov. 1 after a June general election saw the ruling AK Party lose its overall majority, and weeks of coalition talks with opposition parties came to nothing.

Last week’s decision by President Tayyip Erdogan to call new polls is “credit negative” for Turkey and would deepen policy inaction, Moody’s said in a statement.

This will “delay the implementation of economic policies needed to reduce external vulnerabilities, improve the investment climate and reactivate economic growth.”

The gloomy prognosis comes as Turkey’s battered lira hovers close to record lows against the dollar, shedding 24 pct of its value this year.

Meanwhile a surge in violence between security forces and militants from the outlawed Kurdistan Workers’ Party (PKK) -- coupled with wavering global investor confidence in emerging markets -- could further dent Turkey’s modest recent economic growth, predicted at 2.5 percent this year, down from 2.9 percent in 2014.

Prime Minister Ahmet Davutoglu is trying to form an interim government ahead of the elections, but two opposition parties have refused to participate.

With latest polls suggesting a new vote may not produce a dramatically different result, Moody’s warned that uncertainty could persist with the formation of inherently unstable minority governments or coalitions.

“If the November election does not deliver an effective government, it would most likely influence Turkey’s capacity to attract and sustain investor confidence and will further weigh on Turkey’s creditworthiness,” it said. (Writing by Jonny Hogg; Editing by Nick Tattersall and John Stonestreet)

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