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Time in Yerevan: 11:07,   28 March 2024

Moody's cuts Turkey's credit rating to 'junk'

Moody's cuts Turkey's credit rating to 'junk'

YEREVAN, SEPTEMBER 24, ARMENPRESS. Credit ratings agency Moody's Investor Service has downgraded Turkey's sovereign credit rating to non-investment grade citing worries about the rule of law following an attempted coup, risks from external financing and a slowing economy, Reuters reported.

The agency, which cut the government's long-term issuer and senior unsecured bond ratings debt to Ba1 from Baa3, kept Turkey's outlook as stable, saying its "flexible" $720 billion economy and strong fiscal track record offset the balance-of-payments pressure it faces.

Moody's decision followed a reduction to two notches below investment grade by S&P Global Ratings in the immediate aftermath of the coup in July. Fitch Ratings is the only major ratings agency that has Turkey as investment grade. Fitch will review its assessment of Turkey at the beginning of 2017.

President Recep Tayyip Erdogan has criticized the rating agencies for being politically motivated. He accused S&P of siding with the coup plotters after its move in July.

The Moody's rating cut may mean Turkey will have to pay more to borrow money on international markets.

"The drivers of the downgrade are ... the 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," Moody's said in an e-mailed statement following the review it initiated after the failed coup.

"The government's response to the unsuccessful coup attempt raises further concerns regarding the predictability and effectiveness of government policy and the rule of law."

Turkey declared a state of emergency after the coup and tens of thousands of civil servants and soldiers suspected of links with the U.S.-based cleric Fethullah Gulen, whom the government accuses of masterminding the coup, have been detained.

"The large-scale suspensions in the civil service raise doubts over the capacity of Turkey's policy-making institutions to make meaningful further progress in both legislating and implementing the reform program," Moody's said.

Measures taken against businesses suspected of ties to the Gulen movement are likely to harm growth because they raise worries about the protection of private investment and the investment climate in general, the ratings agency said.

 








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