OREANDA-NEWS. Fitch Ratings says that Turkish corporates face slightly weaker economic growth, high inflation and high levels of economic uncertainty in 2016, which represent the key risks for corporate financial flexibility in the near term.

Although Turkish corporates continue to benefit from conservative leverage profiles, as net leverage substantially decreased in 2015 current healthy rating headroom is expected to be slowly eroded by weaker economic conditions in 2016 and 2017.

Turkish corporate credit profiles also remain exposed to rapid lira depreciation, and while the recent fall in the lira following the failed coup in July 2016 has largely reversed, the currency fell by 20% in 2015 and 7% in June 2016 year-on-year. For unhedged issuers with a mismatch between hard-currency-designated debt and Turkish lira-based operations, this will lead to higher funds from operations leverage.

In the telecoms sector, Turkcell Iletisim Hizmetleri A.S (BBB-/Negative), while currently unlevered, could become more exposed if its debt expands in hard currency. In contrast, Turk Telekomunikasyon AS (BBB-/Negative) has significantly increased the hedged portion of its debt and actively shifts its cash to hard currencies. Other sectors are less exposed to this FX risk. Turkiye Petrol Rafinerileri A.S. (Tupras/BBB-) in particular, has little mismatch between hard currency cash revenue and obligations. However, last week we revised its Outlook to Negative due to weaker financial performance and a higher-than-expected dividend payment in 2016.