Turkey loses last major investment grade rating after Fitch downgrades country's sovereign debt to 'junk'
ISTANBUL
"Political and security developments have undermined economic performance and institutional independence," Fitch said in a statement.
It lowered Turkey's rating to BB+ from BBB-, the latter being its lowest investment-grade rating. Fitch revised Turkey's ceiling to "BBB-" from "BBB" but maintained the country's stable outlook.
Fitch has thus become the latest agency which cut Turkey’s sovereign borrower rating.
"While the political environment may stabilize, significant security challenges are set to remain. A constitutional reform process is progressing, which, if approved in a referendum likely to be held in March or April, would entrench a system in which checks and balances have been eroded, in Fitch's opinion.
The purge of the public sector of the supporters of the group that the government considers responsible for the coup attempt in July has continued and a state of emergency remains in place. The scope of the purge, which has extended to the media and other groups, has unnerved some participants in the economy.
High-profile terrorist attacks have continued, damaging consumer confidence and the tourism sector," reads the Fitch statement.
The ratings cut, although widely expected by the markets, came hours after rival agency Standard & Poor's surprised investors by lowering its outlook for Turkey to "negative" from "stable," citing growing constraints on policymakers' ability to contain inflation and shore up the tumbling lira currency.
Last year, S&P cut Turkey's rating further into junk territory. Moody's later followed suit and cut its own rating to junk, citing worries about the rule of law after the failed coup, and a slowing economy.