Moody’s cuts Turkish debt deeper into junk
Moody’s downgraded Turkey’s sovereign debt further into junk territory, citing the erosion of checks and balances in the country.
The ratings agency reduced the country by one level to Ba2, two steps below investment grade, in a statement late on Wednesday. As well as the negative institutional backdrop, highlighted by the increasing powers of President Recep Tayyip Erdoğan, Moody’s referred to the nation’s widening current account deficit, increasing external debt and concerns over monetary policy, which it said was being compromised.
“This overall picture suggests that the possibility of a sudden, disruptive reversal in foreign capital inflows, a more rapid fall in already inadequate FX reserves and, in a worst-case scenario, a balance of payments crisis, while still quite low, has increased beyond Moody's expectations a year ago,” analyst Kristin Lindow said in the statement.
Moody’s said plans by Erdoğan to further strengthen his office after elections next year would further undermine the predictability and effectiveness of policymaking.