S&P lowers Turkey's rating but outlook stable

By Ovunc Kutlu

NEW YORK

Global credit agency Standard & Poor's announced Tuesday that it had lowered Turkey's credit rating.

The agency cut the country’s foreign currency sovereign credit rating to 'BB-/B' from 'BB/B' but with a stable outlook.

"We are downgrading Turkey because of what we view as increasing macroeconomic imbalances," the agency said in a statement.

"In this context, the downgrade reflects our concerns over a deteriorating inflation outlook and the long-term depreciation and volatility of Turkey's exchange rate," it added.

The agency warned that Turkey's rating could be lowered again if external financing conditions and the exchange rate deteriorate further and if vulnerabilities in Turkey's private sector increase.

"In addition, we could lower the ratings if Turkey's fiscal position on a stock and flow basis deteriorates further should the government continue to rely on fiscal stimulus measures to support the economy or should contingent liabilities mount or hit the government's balance sheet," the statement said.

S&P said Turkey's rating could be raised if the central bank brings the inflation level within its 5 percent target range and if Turkey's external position improves sustainably.

The agency said the next scheduled publication on Turkey’s sovereign rating will be Aug. 17, 2018.