Additionally, the lira is facing ongoing pressure with geopolitical tensions between the U.S. and Turkey heightening after negotiations over the detention of a U.S. pastor in Turkey took more steps backward than forward. External financing and current account deficits are also seen as issues for Turkish assets.
“We expect tougher external conditions and tighter domestic policy to underpin the near-term adjustment to the economy. However, as we have previously stated, the absence of a more timely and complete policy response and uncertainty about the authorities’ tolerance for a prolonged period of low growth add to market concerns about the credibility of economic policy. We continue to view capital controls or an IMF programme as unlikely,” according to Fitch.
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