Moody’s considering downgrading Turkey again

Having demoted Turkey to a junk rating in March, credit rating agency Moody’s has indicated that it expects Turkey’s investment environment to continue to deteriorate by considering downgrading it once again, the Financial Times said.

The country going into snap elections set for June 24 was a key indicator that the government also expected economic troubles, Moody’s said, and that it preferred to secure a new mandate rather than to address growing economic worries.

“Today’s decision to place Turkey’s Ba2 rating on review for downgrade is driven by Moody’s expectation that the recent erosion in investor confidence in Turkey will continue if not addressed through credible policy actions following the June elections, leading to a sustained increase in the probability and proximity of severe balance of payments constraints,” the agency said.

“The erosion of confidence was triggered in part by the advancement of presidential and parliamentary elections to 24 June, 17 months ahead of schedule. That decision exacerbated existing investor concerns regarding the negative credit impact of the economic, fiscal and monetary policy settings, and heightened concerns that the next administration would move further down the path of policy options detrimental to economic and financial stability.”

“We are addressing market concerns through credible policy actions,” Deputy Prime Minister for the economy Mehmet Şimşek tweeted in response to the news.

“What took you so long?” was the pithy reply of opposition Good Party advisor Taylan Yıldız.

Since the beginning of the year, the country has lost its investment-grade status with all three major credit rating agencies. Turkish President Recep Tayyip Erdoğan’s response has been to begin the process of setting up his own rival credit rating agency.