Rating agency Moody said that consumption tax cuts in its statement on Turkey said it would temporarily increase the negative impact on the credit assessment of this situation.
Moody ratings on Turkey's credit outlook report today released the following statement:
* Tax cuts temporarily increase consumption but will have a negative impact on rating
* Tax cuts will reduce inflation over the next two months in related sectors but the heading will not have a major impact on inflation
* Financial forces in Turkey, while gradually finding the risk of injury, financial incentives for potential tax cuts as a looser fiscal policy, pointing at the negative credit score
* In addition, there is an increase in domestic demand, slowing macroeconomic rebalancing of Turkey. Given these risks, tax cuts may increase the downward trend in TL and may increase inflation rather than decrease.
* Rebalancing the current account deficit is an important sign of a quiet trend in the overheated economy. Removing the current account deficit reduces the country's external financing needs in an environment where small and expensive capital inflows are increasingly emerging in emerging markets.
* In addition to being ineffective in terms of inflation, tax cuts will be very short to provide more than a temporary increase in consumption due to very high interest rates, which will reduce the borrowing of expensive products, particularly cars and white goods.
* Large fiscal stimulus measures to save the economy from recession will be problematic, although we do not believe that tax cuts will have a clear negative impact on government budget due to temporary tax cuts.