Fitch: Turkey referendum may make space for economic reform

Turkey's constitutional referendum is part of a political shift that has been negative for the country's sovereign credit profile, but may facilitate a revival of credit-positive economic reforms, Fitch Ratings said in a recent report.

Key highlights:

• Earlier this year, Fitch downgraded Turkey's sovereign rating to BB+/Stable reflecting, among other things, the erosion of checks and balances and institutional independence in Turkey in recent years. At the time of the downgrade, Fitch assumed the constitutional amendments would be approved
• New presidential and parliamentary elections are not required until late 2019. This timeframe should allow the economy to move back up the ruling AKP's policy agenda
• The AKP has a developed economic reform programme, but little has been implemented in recent years due to the fluid political backdrop, and structural weaknesses
• The relative weight given to different policy options and their success in promoting stable and sustainable growth will be an important part of our sovereign rating assessment