Ankara rebuffs Moody’s move cutting Turkey to ‘junk’ status

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Nihat Zeybekçi

 

Ankara reacted strongly against Moody’s decision on Friday to cut Turkey’s sovereign debt rating to non-investment grade.

“Moody’s decision to decrease Turkey’s rating does not comply with macroeconomic fundamentals in any way,” said Economy Minister Nihat Zeybekçi in a serial of Twitter messages on Saturday.

“In an environment of global economic slowdown, the Turkish economy grew by 3.9 percent in the first half of the year. In the same period, the Turkish economy decreased its CAD and also enjoyed a budget surplus while many experienced budget deficits,” Zeybekçi said.

“[A]s opposed to Moody’s statement, neither the private sector nor the public sector has experienced any deterioration in their funding capabilities,’ Zeybekçi added.

“We, as the government, will maintain our political solidarity without giving up market-friendly practices and [will] improve the business environment with reforms.”

Deputy Prime Minister Mehmet Şimşek also joined the chorus of reactions by posting messages on Twitter: “Turkey’s foundations are solid. Despite internal and external shocks our economy grew 5.2% following the global crisis. It is robust against shocks.”

“The best response to the rating institutions is to accelerate structural reforms and sustain fiscal discipline.”

“The Turkish economy is not an economy that is lined up in accordance with the reports of three or five rating institutions,” said Prime Minister Binali Yıldırım in İstanbul on Saturday.

 

“We don’t think those evaluations are impartial. We clearly see that there has been some guidance and efforts to create perceptions.”

 

“I don’t care at all, they’re making a mistake, and they’re doing it intentionally,” President Recep Tayyip Erdoğan had said in an interview with Bloomberg in New York a day before the Moody’s statement. “Whether you’re honest or not, Turkey’s economy is strong,” he added.

Global credit rating agency Moody’s joined S&P to put Turkey’s credit rating in junk territory on Friday.

“Moody’s Investors Service has today downgraded the Government of Turkey’s long-term issuer and senior unsecured bond ratings to Ba1 from Baa3 and assigned a stable outlook,” a written statement from the company said on Friday.

The agency based its decision on two factors: the increase in the risks related to the country’s sizeable external funding requirements, and the weakening in previously supportive credit fundamentals, particularly growth and institutional strength.

“Moody’s notes that Turkey continues to operate in a fragile financial and geopolitical environment and that its external vulnerability has risen, both over the past two years and more recently as a result of unpredictable political developments and volatile investor perception,” the statement further said.

Despite Moody’s and S&P’s moves, Fitch has the country’s grade rating on review for downgrade.

 

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