Moody’s, S&P downgrade Turkey's credit ratings

Moody’s Investors Service and S&P Global Ratings have downgraded Turkey's sovereign credit rating, due to Lira volatility and possible recession in 2019.

Moody’s on Saturday downgraded Turkey’s long-term issuer ratings to Ba3 from Ba2 and changed its rating outlook to negative. Its senior unsecured bond ratings and senior unsecured shelf ratings were also cut to Ba3 and (P)Ba3 respectively.

“The key driver for [the] downgrade is the continuing weakening of Turkey’s public institutions and the related reduction in the predictability of Turkish policymaking,” Moody’s said in its note.

Meanwhile, S&P on Friday cut Turkey’s sovereign credit rating to B+ from BB-, citing extreme volatility of the lira, a balance of payments crisis that could undermine the Turkish economy and lead it into a recession next year. It, however, assigned a stable outlook. 

Turkey’s Lira has lost more than 40 per cent of its value against the US dollar this year, prompting fears of a sell-off in emerging markets. The crisis deepened after US President Donald Trump announced a doubling of steel and aluminum tariffs.

Last week, MUFG Bank said the sharp sell-off in the Turkish Lira is likely to set off a wave of selling across the Middle East and North Africa (MENA) regional assets, reviving the specter of contagion effects.