Moody's Downgrades Turkey to 'Junk Rating'

Southeast Europe | September 24, 2016, Saturday // 13:16|  views

Turkish President Recep Tayyip Erdogan has said he does not "care at all" if his ratings agencies decide to donwgrade his country has their decisions are based on politics rather than economics. File photo, EPA/BGNES

Turkey's long-term issuer and senior unsecured bond ratings have been cut by one notch to Ba1, the rating agency said in a press release on Friday.

The outlook is "stable", in view of the government's balance sheet which will allow for the "absorption of shocks and flexible responses" and of the "large and flexible economy which continues to register positive growth and the government’s strong fiscal track record.”

However, the country's finances have weekened amid the increased political turmoil, Moody's noted. Other sources of concern stem from the response to July's unsuccessful coup attempt which poses questions "regarding the predictability and effectiveness of government policy and the rule of law going forward."

It is also noted that "the erosion of Turkey's institutional strength, which was evident prior to the failed coup attempt but which the event may exacerbate, has negative implications both for the level of growth in the coming years and for the implementation of the structural changes the government has identified are needed to deliver balanced, sustainable growth and relieve external pressures."

A fall in tourism receipts has also been noted, as part of the effect of Russian sanctions and an increased number of attacks in the country.

The decision places Turkey's credit rating in junk territory for the first time.

"Increase in the risks related to the country's sizeable external funding requirements" and "the weakening in previously supportive credit fundamentals, particularly growth and institutional strength" have been cited as reasons.

Deterioration in the country's credit rating is expected to go on over the next two to three years.

S&P already took the step earlier this year.

But Turkey's President Recep Tayyip Erdogan noted in a recent interview with Bloomberg that he doesn't "care at all" about prosepective downgrades, as ratings companies allegedly made decisions based on politics and not on economic fundamentals.

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Tags: Recep Tayyip Erdogan, junk, S&P, Moody's, turkey, Turkey coup


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