MADRID (Standard & Poor’s) Aug. 21, 2015: Standard & Poor’s Ratings Services
published a Credit FAQ today, “What Early Elections Could Mean For Turkey.”
Turkey’s June elections resulted in a hung parliament. Since then, political
parties, including President Recep Tayyip Erdogan’s Justice and Development
Party (AKP), have held talks on a possible coalition without reaching an
agreement. Alongside the rising domestic political uncertainty, Turkey is
facing mounting geopolitical concerns along its southeastern border. The
recent escalation in violence between militants from the Kurdistan Workers’
Party (PKK) and the government is also fueling the disquiet.
Prime Minister Ahmet Davutoglu returned the mandate to form a new government
to President Erdogan a few days ago, following the inconclusive coalition
talks. Earlier today, the president called for early elections, which will
likely be held in November. Turkey is consequently unlikely to regain a stable
government before the end of 2015. In Standard & Poor’s Ratings Services’
opinion, the uncertain political landscape could weaken the policy response to
both external and domestic events, including potential capital outflows.
The FAQ examines the impact of elections on Turkey in the context of its
external profile, and what a reversal of foreign capital outflows could imply
for GDP growth and for the banking sector.