Fitch cuts Turkey debt outlook after coup attempt
Deputy Prime Minister Mehmet Simsek welcomes retaining credit rating at BBB- as 'phenomenal'
The ratings agency Fitch cut its outlook for Turkey’s sovereign debt rating to “negative”, saying last month’s coup attempt underscored risks to political stability in the country.
The agency affirmed the country’s rating at BBB-, a notch above junk grade.
Fitch said political uncertainty follow the failed coup will impact economic performance and could hurt economic policy.
“The authorities are responding to the coup attempt with a purge of the followers of those it blames, with around 70,000 public sector workers suspended so far,” the agency said in a statement.
“The implications for checks and balances, which in Fitch’s opinion have eroded in recent years, are unclear, as is the potential for further disruption from those behind the coup attempt.”
The poor rating will help elevate the prices Turkey pays to borrow on debt markets.
Fitch’s decision to keep Turkey’s credit rating at BBB- was “phenomenal” in the aftermath of July 15 coup attempt, according to the country’s Deputy Prime Minister Mehmet Simsek who reacted on Saturday.
“Given what Turkey has gone through recently the change in outlook is not a hugely surprising thing, but retaining the rating is phenomenal and suggests Turkey’s fundamentals are strong,” Simsek told reporters in Istanbul.
Simsek said downward risks on growth have increased following the events in the third quarter, when the coup attempt took place. He added he believed there would be revisions to the medium-term program in the end of September or early October.
Fitch said revenues from tourism arrivals were down 41 per cent year-on-year for the first half of 2016, a sector which accounts for 13 per cent of external receipts.
“Growth is forecast to dip due to lower investment,” the statement said, “although a strong start to the year means that, at a Fitch-forecast 3.4 per cent of GDP in 2016, it will be above the peer median.”