Fitch cuts Turkey's grade to BB with negative outlook

7/13/2018, 10:38 PM
Fitch cuts Turkey's grade to BB with negative outlook

A surge in inflation and current account deficit in combination with depreciation and the corporate sector's exposure to debt in foreign currency were highlighted by Fitch Ratings' update on Turkey on Friday. The country's long-term foreign-currency issuer default rating was slashed to BB from BB+, while the grade for local currency was cut to BB+ from BBB-, both with a negative outlook. The short-term items were affirmed at B and downgraded to B from F3, respectively.

"In Fitch's opinion, economic policy credibility has deteriorated in recent months and initial policy actions following elections in June have heightened uncertainty. This environment will make it challenging to engineer a soft landing for the economy," the report said and added the said deficit could expand to 6.1% of the gross domestic product this year before falling to 4.1% in 2019.

The ratings firm reiterated President Recep Tayyip Erdogan's statements indicate influence on monetary policy and noted his son-in-law Berat Albayrak became the minister of finance. Erdogan has fiercely criticized and threatened major credit appraisers and decided to establish a domestic agency.

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