Moody's downgrades Turkey rating to B1

Moody's Investors Service cut Turkey’s sovereign credit rating to B1 from Ba3 and maintained a negative outlook, the rating company said in a statement.

The agency noted that the risk of a balance of payments crisis continued to rise, and with it the risk of a government default.

According to Moody’s, the continued erosion in institutional strength and policy effectiveness on investor confidence was increasingly outweighing Turkey’s traditional credit strengths including its large, diverse economy and the low level of government debt.

"It remains highly vulnerable to a further prolonged period of acute economic and financial volatility," the statement said, adding that foreign exchange reserve buffers are weak.

"Most measures taken by the government continue to be focused on the near-term priority of propping up economic activity at the expense of eroding the underlying resilience of the economy and its banking system to external shocks," Reuters cited the statement as saying.

Moody’s cut the rating to Ba3 from Ba2 in August last year.