ISTANBUL: Turkey's next government could focus too much on spurring economic growth after a June general election, credit-rating agency Fitch said on Tuesday, after months of tension between President Tayyip Erdogan and the central bank.
Erdogan has repeatedly urged official interest rates cuts to boost growth in the run-up to ahead of the election, unnerving financial markets and helping send the lira to record lows.
The pressure has called into question the government's commitment to rebalancing the economy away from the credit-led growth which has driven up Turkey's current account deficit and left it exposed to swings in global capital flows.
Deputy Prime Minister Ali Babacan, highly respected by foreign investors, has defended the independence of Central Bank Governor Erdem Basci in recent weeks. But there are questions over whether Babacan will return to office after the election, while Basci's term is due to expire in 2016.
"The issue is to what extent their replacements are perhaps more pro-growth than the current team has been," Paul Rawkins, senior director in Fitch's sovereign ratings team, said on a conference call following a ratings review last Friday.
"The risk there is a more pro-growth team, more pressure on the central bank to lower the interest rates and perhaps a return to the imbalances that we've seen in the past, driven by this ambition that Turkey should grow at 5 percent when in fact at this point probably around 4 is more likely."
Fitch kept its investment-grade rating on Turkey on Friday and affirmed its outlook, but cited concerns about the independence of the central bank.
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