Fitch keeps its Turkey rating at investment grade

 21 Aug 2016 - 0:00

ISTANBUL: Ratings agency Fitch affirmed its sovereign rating on Turkey at ‘BBB-’, the lowest investment grade, but lowered its outlook to negative from stable in a review after last month’s attempted military coup.
Investors have been rattled by both the failed July 15 putsch, when a group of rogue soldiers attempted to overthrow the government, and the widespread crackdown that has followed, with the arrests or dismissals of tens of thousands of people. “An unsuccessful coup attempt in July confirms heightened risks to political stability,” the Fitch statement said, saying a purge of some 70,000 public sector workers “generates uncertainty over capacity and continuity”.
“Political uncertainty is expected to impact economic performance and poses risks to economic policy,” it added.
Both Fitch and Moody’s rate Turkey at the lowest investment grade rung, allowing its bonds to be bought by more conservative funds that require a country to be classed as investment grade by at least two agencies.
Moody’s said on July 18 it was putting Turkey’s credit rating on review for a possible downgrade to junk status.
Standard & Poor’s cut its unsolicited rating on Turkey further into junk territory last month and changed its outlook to negative, also citing concerns following the coup. In Friday’s statement, Fitch said the overwhelming public opposition to the coup attempt and subsequent unity of most political parties could lessen political fractures.
But security conditions have worsened, it said, referring to militant attacks which it said were having a material impact on the tourism sector.
It did not expect the fiscal stance to weaken in response to the coup attempt, though “the central bank and commercial banks are facing renewed political pressure on interest rates,” it said.
A downgrade could be triggered by prolonged or deepened political instability, insecurity or geopolitical stresses that undermine economic performance or economic policy credibility, it added.
Meanwhile, Turkish Deputy Prime Minister Mehmet Simsek yesterday said rating agency Fitch’s decision to keep Turkey credit rating at BBB- was “phenomenal” in the aftermath of July’s coup attempt. “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 programme in the end of September or early October.

Reuters

ISTANBUL: Ratings agency Fitch affirmed its sovereign rating on Turkey at ‘BBB-’, the lowest investment grade, but lowered its outlook to negative from stable in a review after last month’s attempted military coup.
Investors have been rattled by both the failed July 15 putsch, when a group of rogue soldiers attempted to overthrow the government, and the widespread crackdown that has followed, with the arrests or dismissals of tens of thousands of people. “An unsuccessful coup attempt in July confirms heightened risks to political stability,” the Fitch statement said, saying a purge of some 70,000 public sector workers “generates uncertainty over capacity and continuity”.
“Political uncertainty is expected to impact economic performance and poses risks to economic policy,” it added.
Both Fitch and Moody’s rate Turkey at the lowest investment grade rung, allowing its bonds to be bought by more conservative funds that require a country to be classed as investment grade by at least two agencies.
Moody’s said on July 18 it was putting Turkey’s credit rating on review for a possible downgrade to junk status.
Standard & Poor’s cut its unsolicited rating on Turkey further into junk territory last month and changed its outlook to negative, also citing concerns following the coup. In Friday’s statement, Fitch said the overwhelming public opposition to the coup attempt and subsequent unity of most political parties could lessen political fractures.
But security conditions have worsened, it said, referring to militant attacks which it said were having a material impact on the tourism sector.
It did not expect the fiscal stance to weaken in response to the coup attempt, though “the central bank and commercial banks are facing renewed political pressure on interest rates,” it said.
A downgrade could be triggered by prolonged or deepened political instability, insecurity or geopolitical stresses that undermine economic performance or economic policy credibility, it added.
Meanwhile, Turkish Deputy Prime Minister Mehmet Simsek yesterday said rating agency Fitch’s decision to keep Turkey credit rating at BBB- was “phenomenal” in the aftermath of July’s coup attempt. “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 programme in the end of September or early October.

Reuters