Turkey is going through political and economic turbulence. In response to the failed coup attempt, international rating agencies downgraded Turkey’s sovereign credit rating. S&P Global Ratings immediately lowered Turkey’s credit rating to BB, two steps below investment grade. The “polarization of Turkey’s political landscape has further eroded its institutional checks and balances”, S&P wrote in a statement. “S&P should not mess with Turkey,” President Recep Tayyip Erdogan commented the move from S&P in a televised address, adding that economic reforms in the country would continue uninterrupted.
A month later, Fitch Ratings announced that it affirmed Turkey’s long-term foreign and local currency issuer default rating (IDR) at “BBB-”, the lowest investment grade, and downgraded the outlook to negative from stable. Fitch experts say that the revision of the outlook reflected escalating risks to political stability after the coup attempt and therefore growing risks to economic performance. Besides, a series of terror attacks in Istanbul and Ankara undermine stability and the investment environment. Fitch stated that rising political uncertainty could scare off investment and retard economic growth.
Echoing its counterparts, Moody’s warned it could also cut Turkey’s sovereign debt rating to junk status. Moody’s gave a mid-October deadline for reviewing its Baa3 investment grade. Meanwhile, Turkey’s ministers and officials have been scrambling to prove that the world’s 17th largest economy is on a sound footing. Nevertheless, most analysts believe another downgrade is more likely than not.
