S&P further cuts Turkey’s debt rating

Standard & Poor's downgraded Turkey’s credit rating to B from B+, the credit rating agency said in a statement on Friday after markets closed in the United States. The outlook on the rating is stable, it said.

Turkey is prioritising growth over financial and monetary stability ahead of the 2023 elections, Bloomberg cited S&P as saying in its statement. The country is scheduled to hold parliamentary and presidential elections by June 2023 the latest.

“In our view, highly accommodative fiscal and monetary settings risk further undermining confidence in the lira as a store of value, against a backdrop of tightening global financing conditions,” S&P said.

Turkish President Recep Tayyip Erdoğan has been championing an unorthodox policy of cutting interest rates despite soaring inflation in the country and the lira losing more than 50 percent of its value against the dollar over the past year. The Turkish central bank’s one week repo rate is currently 12 percent, despite annual price gains of over 80 percent, Bloomberg said.

Further depreciation of the lira would impact Turkey’s financial stability negatively, it added.

The two other major credit ratings agencies Fitch and Moody’s had already downgraded Turkey to B and B3 respectively, in July and August. Moody’s also changed the outlook to negative. Fitch’s outlook was already negative. Both cited Turkey’s inflation, currently at an official 24-year high of 80 percent, among reasons for their rating cuts.

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