Turkish banks 'remain well-capitalized': Moody's

Turkish banks remain well-capitalized, while the country's tourism sector is expected to get a boost following reconciliation with Russia, Iraq and northern Iraqi regional government, Moody's said on Monday.

In a note sent to Anadolu Agency, the credit rating agency said: “Turkish banks remain well-capitalized but the lira's depreciation and economic slowdown raised new concerns over the banking system, and we expect these factors to negatively affect asset quality, funding costs, profitability and the growth potential of Turkish banks."

Moreover, the institute said “reconciliation with countries, especially with Russia, Israel and northern Iraqi regional government" is likely to benefit Turkey's tourism sector.

“It's quite early to assess how improvements in Turkey's relations with a few countries may impact its economy, but potentially it could have a positive influence on the tourism industry which has faced challenges over the last few years in the face of a decline in tourists," Moody's said.

According to Moody's forecasts, Turkey will grow by 2.3 percent in 2017 and pick up to 3 percent in 2018.

The consumer prices inflation expectation is 8.2 percent for the end of this year and 8 percent by the end of 2018.

Current account deficit to gross domestic product (GDP) ratio, which is one of Turkey's key challenges for some time, is expected to be at 5.2 percent for this year and 5.3 percent next year, according to the note.

Regarding possibility of revising Turkey's credit note to upper levels, it said the current account deficit challenges weigh on credit note. But a series of structural reforms that would tackle this challenge and improvement in competitiveness might back up an upgrade.