Turkey: S&P rating downgraded public debt outlook

The rating agency Standard and Poor’s announced that it downgraded the outlook for its public debt Turkey, citing policies and financial uncertainties. Now, instead of being stable, the outlook is negative.

For the time being, the house maintained the country’s rating at B + (“very profitable” position). In general, however, the revision of the outlook for the worse heralds the forthcoming downgrade of the rating in the medium term.

“We can downgrade our assessment if Turkey’s economic policy further undermines the Turkish lira’s exchange rate and worsens the outlook for inflation, increasing the risk for the banking system with an impact on public debt,” he said. S&P with his newsletter on Friday (10/12).

“This could happen, for example, if the country’s citizens convert their incomes into dollars or withdraw them from the financial system, or if the access of Turkish banks to international financing deteriorates,” the rating agency said.

In defiance of classical economic theory, the Turkish President, Recep Tayyip Erdogan, claims that high interest rates cause price increases. He assures that their reduction stimulates production and exports.

At the request of the President, the Turkish Central Bank – an officially independent institution – reduced its guiding interest rate (from 16 to 15%) in November, for the third time in two months.

Last week, inflation reached a new three-year high in Turkey, overcoming it 21% at an annual rate – more than four times the target of the government – further plunging the country into crisis.

Given the possible further reduction of interest rates, possibly even within the month, already another rating agency, the Fitch Ratings, also announced the downgrading – and this from stable to negative – of the debt of the Turkish state.