S&P Global Ratings and Moody’s lowered Turkey’s ratings, saying they could be upgraded with certain economic improvements.
Standard & Poor’s said it lowered the country’s long-term foreign currency sovereign credit rating to 'B' from 'BB-' while maintaining the outlook at stable, Anadolu Agency reported.
The agency said it affirmed the short-term foreign and local currency sovereign credit ratings on Turkey at 'B'.
“We could consider an upgrade if the government successfully devises and implements a credible economic adjustment program that bolsters confidence, stabilizes balance-of-payments flows and brings inflation under control," the agency said in a statement.
Moody’s cut Turkey’s sovereign credit rating deeper into 'junk' territory on Friday, citing a weakening of public institutions and the related reduction in the predictability of policy making in a country which is facing a currency crisis, Reuters reported.
“That weakening is exemplified by heightened concerns over the independence of the central bank, and by the lack of a clear and credible plan to address the underlying causes of the recent financial distress,” the agency said in a statement.
The agency said Turkey’s rating could be stabilized "if the Turkish authorities presented a coherent and effective economic plan in the near term that involves a material fiscal and monetary policy tightening to induce an orderly slowdown of the economy, leading in turn to lower inflation and inflation expectations as well as a reduction in the size of the current account deficit."
"Significant external financial support would likely act as a supportive factor to the rating," it added.
Moody’s lowered the rating to Ba3 from Ba2 and changed its rating outlook to negative in a move which came on the heels of a downgrade by S&P.
The lira has lost nearly 40% of its value against the dollar this year, sparking a sell-off in emerging market currencies and weighing on global stocks. The crisis has been precipitated by investor alarm about President Recep Tayyip Erdogan’s influence over monetary policy.
