Moody's rate cut politically motivated: Turkish adviser

ANKARA

Moody's unexpected downgrade of Turkey's credit rating is politically motivated rather than based on economic fundamentals, Turkish president’s Chief Adviser Cemil Ertem told Anadolu Agency Monday.

"This is a politically-motivated decision and a sequel to attacks against Turkey," Ertem said.

He said Moody's rate cut decision, which saw Turkey's rating down to non-investment grade, came as a surprise and had put investors into trouble. He noted that two days prior to the rate cut, a senior Moody's officer highlighted to an international news agency that shock impact of the July 15 defeated coup on Turkish economy had dissipated.

He pointed out that Moody's move correlated with the discord between the U.S. and Turkey over vital issues such as extradition of Fetullah Terrorist Organization (FETO) leader Fethullah Gulen, whom Turkish government accuses of orchestrating the coup bid. Also, Turkey has asked the U.S. to stop supporting terrorist groups such as the PYD/PKK.

"There are different approaches within the U.S. For example, Pentagon says something while foreign ministry says another thing.

“We observe an inconsistency in the U.S. And we see actions against Turkey which is pointless and contradictory to strategic partnership relation. Moody's attitude is economic reflection of this false and deficient approach," Ertem said.

"In this sense, Moody's decision is subjective. This rate cut is not a decision made on basis of economic fundamentals. This is a politically-motivated decision and a sequel to attacks against Turkey," he added.

Ertem said many global investors last week met President Recep Tayyip Erdogan in New York, where participants gave their full support to Turkish economy and expressed their willingness to continue their investments in Turkey.

He emphasized that some people expected the interest rate to hike sharply and the U.S. dollar to rise over 3 against the Turkish lira.

“They expect mini crises. Now, dollar is trading under 3 liras. Turkey is one of the few countries that international investors would invest.

“All institutions in the country are ready to counter these subjective decisions. We will see in the coming days that Turkey’s economy and the investment will not be affected by the decision.”

He said international pension funds must have an investment grade rating from at least two international credit rating agencies.

"In this case, the capital outflows may be between $2 [billion] and $4 billion. The size of Turkey's economy is able to meet such outflow. They do not affect us much," he said.

Moody's Investor Service revised Turkey's rating Friday to "Ba1" from "Baa3", and assigned a "stable" outlook.

The global credit agency said the move "concludes the review for downgrade that was initiated on 18 July," which began after a failed coup.

Moody's said assigning stable outlook balances downside risks in the Turkish economy, which the agency defined as "large and flexible".

Turkey's economy continued to expand while the Turkish government still has "a strong fiscal track record”, it said. "The stable outlook on the Ba1 rating reflects the strengths in the credit profile, namely the government's robust balance sheet, which would allow for the absorption of shocks and flexible responses.”