Moody’s cuts Turkey outlook
istanbul — Turkey’s credit outlook was lowered by Moody’s Investors Service, which cited persistent political uncertainty after last July’s failed coup. The lira erased its gain.
Moody’s reduced the outlook to negative from stable and kept its rating one notch below investment grade at Ba1, on par with Russia, according to a statement Friday. Fitch Ratings ranks the nation at the same level.
“The impact of ongoing political and geopolitical tensions on domestic confidence, and the heightened external pressures that led to a steep depreciation of the lira and high inflation, will suppress growth in the near-term relative to expectations last year,” Moody’s said in the statement.
The lira dropped 0.3 per cent to 3.6365 per dollar at 5.00pm in New York, erasing gains. The ratings agency cited the continuing erosion of Turkey’s institutional strength and weaker growth outlook as reasons for its change.
Political developments affecting the economy include government-backed purges against alleged members of a group blamed for last year’s failed coup attempt. Moody’s said a referendum on April 16 to change the constitution to give President Recep Tayyip Erdogan more powers is unlikely to erase divisions between the ruling AK Party and the opposition. Steps taken to reduce various forms of opposition since the coup attempt have undermined the country’s administrative capacity and damaged private sector confidence, it said.
Erdogan is seeking to transform the mostly ceremonial post of president into the official nexus of political power, with Turks voting in the referendum on the shift. While critics accuse the president of trying to create a one-man rule, Erdogan and the government claim the changes will help to foster growth.
Turkey’s economy contracted 1.8 per cent in the third quarter and recorded only “so so” growth in the fourth, Deputy Prime Minister Mehmet Simsek said in January, as the political fallout from July’s failed coup weighed on sentiment. The government said the July actions were orchestrated by US-based cleric Fethullah Gulen, and responded by purging more than 100,000 alleged followers of the preacher from their jobs in the military, judiciary and other state institutions.