NEW:  S&P lowers Turkey outlook to negative, citing ‘rising risks’

S&P Global Ratings on Friday changed its outlook for Turkey’s credit rating to negative from stable, as the country struggles with high inflation and a depreciating currency.


Turkey’s annual inflation has surged above 20 percent to its highest level in three years after President Recep Tayyip Erdogan installed loyalists at the central bank who share his unorthodox vision that high borrowing costs cause inflation rather than slow it down.


The move was part of Erdogan’s strategy to revive his sagging approval numbers ahead of an election due by 2023.


In justifying its outlook downgrade, S&P pointed to both price increases and the lira currency’s loss in value as risks.


“The negative outlook reflects what we view to be rising risks to Turkey’s externally leveraged economy over the next 12 months from extreme currency volatility and rising inflation, amid mixed policy signals,” the ratings agency said.




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S&P made no change in its ratings of Turkey’s debt.


But it warned that could change if the government’s policies “further undermined the exchange rate of the lira and worsened the inflation outlook, heightening the risk of banking system distress.”



Last week, Fitch also revised Turkey’s credit outlook from stable to negative. Moody’s didn’t change Turkey rating or outlook, citing a narrowing current account deficit at adding to external resilience. Yet, the agency has upped year-end 2021 CPI forecast to 25% emphasizing rising dollarization risk.


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Published By: Atilla Yeşilada

GlobalSource Partners’ Turkey Country Analyst Atilla Yesilada is the country’s leading political analyst and commentator. He is known throughout the finance and political science world for his thorough and outspoken coverage of Turkey’s political and financial developments. In addition to his extensive writing schedule, he is often called upon to provide his political expertise on major radio and television channels. Based in Istanbul, Atilla is co-founder of the information platform Istanbul Analytics and is one of GlobalSource’s local partners in Turkey. In addition to his consulting work and speaking engagements throughout the US, Europe and the Middle East, he writes regular columns for Turkey’s leading financial websites VATAN and and has contributed to the financial daily Referans and the liberal daily Radikal.