A prominent credit rating agency, Moody's, has revealed in a report that Turkey

faces possible economic risks following the increased insurgency in Iraq,

highlighting an expected decrease in Turkish exports and upwards pressure on

inflation rates due to a rise in oil prices.
However, some Turkish economists have rejected Moody's unfavorable predictions

which could foreshadow a negative rating announcement in August; Turkey’s

rating is currently Baa3.
The crisis in Iraq, generated by the Islamic State of Iraq and Levant-led campaign,

will constitute a downward risk to Turkey in its current account deficit, growth and

inflation, Moody's said on Monday, estimating that 15 percent of Turkey's exports

– nearly three percent of its GDP – will be at risk.
The Turkish Exporters’ Assembly said on Tuesday that exports to Iraq fell by more

than 20 percent in June, when the Sunni rebellion began and took the country's

second-biggest city Mosul on June 10.
Iraq is Turkey’s second-biggest export market, worth US$12 billion and accounting

for eight percent of Turkey's overall exports. Trade mainly flows with the Kurdish

region of the country, which is relatively stable.
Arfi Unver, the head of the Association of Capital Market Investors, called the

report non-objective, criticizing it for focusing on the negative while ignoring

favorable developments, describing it as ‘perception management’.
Unver added that the local market participants saw overlooking these improving

developments as “insincere”.
An economic expert from Gazi University, Leven Yilmaz, said rating agencies’

prospects over developing countries often failed to be accurate. He said both local

and foreign investors lost confidence in them and accused Moody's of failing to

foresee the financial crisis in 2008 that hit some European countries.
Yilmaz also said he was confident that the August rating by Moody's will be

revised, even if it was still negative adding that agency’s Monday report missed the

launch of Kurdish oil shipments through Turkish pipelines and Ankara’s growth

rate of this year's first quarter.
In other developments, the Brent crude oil prices soared to US$114 per barrel

following the crisis in Iraq on June 19; however, they went back down to US$110 on

Thursday.
Turkey grew 4.3 percent in the first quarter of 2014, a figure that beat the

estimations. The World Bank upgraded its 2014 growth forecast for Turkey to 3.5

percent from 2.4 on June 11.
Turkey's current account deficit fell to US$56.6 billion in April 2014, from US$65.1

billion in the end of the last year, a significant development on Turkey's worrying

trouble due to energy dependence.
Moody's foresees a continuing decrease to US$46 billion by the end of 2014.