The unkindest cut.
Ratings agency Moody’s cut Turkey’s long-term issuer and senior unsecured bond ratings by one notch to Ba1 with a ‘stable’ outlook on Friday — placing the country’s credit rating in junk territory.
Moody’s, which had previously delayed its decision, cited two key reasons for the downgrade:
1. The increase in the risks related to the country’s sizeable external funding requirements.
2. The weakening in previously supportive credit fundamentals, particularly growth and institutional strength.
The agency said it expects that the deterioration in Turkey’s credit rating will continue over the next two to three years. It added that the stable outlook reflected “the government’s robust balance sheet, which would allow for the absorption of shocks and flexible responses”.
Moody’s also said it sees Turkey’s real GDP growth averaging 2.7 per cent between 2016 and 2019.
S&P Global Ratings has already placed Turkey’s credit rating in junk territory while Fitch has Turkey’s BBB- investment grade rating on review for a downgrade.