ISTANBUL (Reuters) - Anti-government protests are not a threat so far to Turkey's investment-grade credit rating, Fitch said on Friday, but much depends on how the authorities handle the unrest.
Fitch said demonstrations so far had not been on a scale to cause significant economic disruption but could escalate and harm the economy if poorly handled by the authorities.
Fitch gave Turkey an investment grade rating of 'BBB-' in November, citing underlying economic strengths.
The country secured its second such rating last month when Moody's upgraded it to Baa3, a move that enabled more funds to invest in the economy.
"The level of unrest is well within the tolerance of political stability embedded in the current rating, and the economic impact so far is minor," Fitch said on Friday.
It said it was not surprising that the protests had emerged before a 2014-2015 election cycle.
"The demonstrations have not been on the scale that would bring about the kind of economic dislocation that has occurred in parts of the Arab world in recent years," it said.
It said the economy has performed well and while Turkey's current account deficit and short-term debt are large, financing has proved resilient.
"Nonetheless, much will depend on how the authorities respond to the protests. Poorly handled, the situation could escalate, with adverse consequences for the economy," it added.
It said persistent political and social unrest could deter tourism, destabilize short-term capital inflows, drive up inflation and damage economic growth.
(Writing by Daren Butler; Editing by Nick Tattersall/Ruth Pitchford)