Turkish economy minister expects negative revision from Moody’s

ISTANBUL

Ahead of the agency’s announcement of its note on the Turkish economy on Aug. 8, Economy Minister Nihat Zeybekci said he expected “a negative move from Moody’s.” AA Photo

Turkey’s economy minister has said he expects ratings agency Moody’s to revise Turkey’s grade downward, despite the “well-bound course of the Turkish economy,” accusing the agency of acting according to political motivations.

Ahead of the agency’s announcement of its note on the Turkish economy on Aug. 8, Economy Minister Nihat Zeybekci said he expected “a negative move from Moody’s.”

The minister told CNBC-e and NTV that the economy was doing very well, claiming it would easily reach its year-end current account deficit and trade deficit targets.

But he continued: “Let me tell you a dramatic thing … I don’t have a positive expectation from Moody’s, I expect a negative move because it will assess politically and because they relate their intentions regarding what Turkey should be right now, not their expectations and forecasts regarding Turkey’s future.”

Rate reduction call

In a separate statement released earlier in the day, the minister called on the Central Bank to be undaunted by the July inflation rate that exceeded forecasts and continue reducing interest rates “until the expectations of producers and exporters will be met.”

“To the contrary to the comments that say the interest rates should not be cut in the next PPK [Monetary Policy Committee] meeting after the inflation data that came in above expectations, we believe that reductions should continue until they meet expectations,” he said in the statement, pledging support for the bank.

Official data released on Aug. 4 showed that Turkish inflation accelerated above expectations in July, climbing to 9.32 percent on an annual basis due to disappointing food price levels.

The gloomy figure has prompted analysts to suggest that the Central Bank shelve interest rate cuts in the short term until it sees an improvement in inflation – something that it has been pledging to do.

Zeybekci also acknowledged that the announced data indicated that the year-end inflation may surpass official targets as well, but expressed his displeasure with that possibility.

“We see the possibility of the upward revision of our year-end inflation as an unacceptable injustice to Turkey and the political and economic stability that has been maintained,” he said.

In the statement, the minister also claimed “production and distribution companies move with short-term motives instead of making long-term production and stock plans due to high interest rates, and this leads to a rise in costs and inflation.”

Zeybekci, a vocal supporter of lower interest rates, has been echoing Prime Minister Recep Tayyip Erdoğan’s urge for steep rate reductions that will fuel growth rates in the short term.