While International credit rating agency Standard & Poor’s downgraded Turkey’s credit rating, it also shared several comments and forecasts regarding elections, relations with Russia, inflation and dollar / TL rate.
The international credit rating agency Standard & Poor’s (S&P) downgraded Turkey’s credit rating from ‘B+’ to ‘B’ last night. The organization also reported that the outlook for Turkey’s credit rating was ‘stable’. Thus, S&P, as well as Fitch, lowered Turkey’s credit rating to 5 digits below the investable level.
Moody’s, another international credit rating agency, had downgraded Turkey’s credit rating from ‘B2‘ to ‘B3’ on August 12. This level is 6 steps below the investable level.
The grade levels given to Turkey by the three organizations are in the region described as ‘highly speculative’.
On the other hand, balance of payments risks, low reserves and loose monetary policy were the main reasons for the downgrade.
DOLLAR AND INFLATION FORECAST
S&P’s rating decision also included inflation and dollar/TL forecasts. The organization predicted that the average inflation will be 74 percent in 2022, 40.1 percent in 2023, 18 percent in 2024 and 12 percent in 2025.
On the other hand, S&P is observed to expect the dollar / TL to rise to 20.50 at the end of 2022, to 23.00 at the end of 2023 and to remain at this level for the next two years.
LOW RESERVES, FRAGILE TL, ELECTIONS
The important parts in S&P’s statement about the rating decision are as follows:
– Loose monetary and fiscal policy and low net foreign exchange reserves increase the fragility of the TL with their effects on financial stability and public finances.
– As we approach the 2023 elections, broader fiscal risks are increasing, as measured by the widening general public deficit and the dollarization of the country’s on-and-off balance sheet liabilities. As the elections approach, the government is prioritizing economic growth over financial and monetary stability.
– Turkey’s external position continues to be a fundamental credit weakness.
– The stable outlook reflects balanced risks to Turkey’s creditworthiness: the remaining fiscal space of the central government against obvious balance of payments vulnerabilities, contingent liabilities arising from state-owned banks and public organizations, and unpredictable policy settings.
SOURCE: cumhuriyet.com.tr/ekonomi/standard-and-poors-turkiyenin-kredi-notunu-dusurdu-1987278
