OREANDA-NEWS. Turkey's sovereign credit profile continues to mix high exposure to global financial market conditions and other structural weaknesses with strong public finances and a record of resilience to recent external shocks, says Fitch Ratings. This is reflected in the Stable Outlook on Turkey's 'BBB-' rating, which we affirmed last month.

Very large external financing requirements that expose Turkey to shifting investor sentiment remain a potential source of risk. Turkey's external liquidity is weaker than for ratings category peers, with the international liquidity ratio of 70.3% less than half the 'BBB' median of 146.3%. But there has been no "sudden stop" of capital during bouts of market volatility since the 2008 global financial crisis.

Turkey's low government debt/GDP is a key support for the rating. Debt/GDP is forecast at 35.3% in 2015, below the 'BBB' median (42.7%), with the former expected to fall over the next two years while the latter rises.

Commitment to fiscal discipline appears to receive broad political support even at a time of heightened political uncertainty, with this year's second general election due on 1 November and polls pointing to a similarly inconclusive outcome. Pre-election spending commitments by the major parties are modest, although higher than ahead of the June polls; and the interim government's latest Medium-Term Plan, announced last week, sees spending rise slightly but the central government continuing to run primary surpluses.

The external balance sheet has strengthened by some measures. We forecast the current account deficit to narrow to 4.6% of GDP this year from 5.8% in 2014. But this is largely due to lower oil prices, rather than structural gains in competitiveness or domestic savings. There is little indication that Turkey is achieving a better mix of current account financing, for example via higher foreign direct investment. The importance of consumption to GDP growth and persistently weak investment also points to a lack of structural reform.

Lira depreciation may add to the monetary policy challenge presented by above-target inflation. The central bank kept its key rates unchanged on Wednesday. We assume policy rates will be raised after Fed lift-off and that the approach to the planned normalisation of the complex monetary policy framework will become clearer.

If November's election led to the formation of a stable government, structural reform and growth could benefit.

Turkey's sovereign credit profile is among the topics under discussion at Fitch's annual Turkey conference in Istanbul today. Presentations from the event, "An Evolving Turkey in a Changing World", will be available at www.fitchratings.com.