Downgrade: Fitch cuts Turkey debt outlook

Rating agency says political uncertainty will weaken economic performance

WASHINGTON: Ratings agency Fitch on Friday cut its outlook for Turkey’s sovereign debt rating to “negative”, saying last month’s coup attempt underscored risks to political stability in the country.

The agency affirmed the country’s rating at BBB-, a notch above junk grade.

Fitch said political uncertainty following the failed coup will impact economic performance and could hurt economic policy.

“The authorities are responding to the coup attempt with a purge of the followers of those it blames, with around 70,000 public sector workers suspended so far,” the agency said in a statement.

“The implications for checks and balances, which in Fitch’s opinion have eroded in recent years, are unclear, as is the potential for further disruption from those behind the coup attempt.”

Elements within the Turkish military on July 15 attempted the ouster of Turkish President Recep Tayyip Erdogan but were quickly repulsed by loyalists.

The poor rating will help elevate the prices Turkey pays to borrow on debt markets.

Fitch said revenues from tourism arrivals were down 41% year-on-year for the first half of 2016, a sector which accounts for 13% of external receipts. “Growth is expected to dip due to lower investment,” the statement said, “although a strong start to the year means that, at a Fitch-forecast 3.4% of GDP in 2016, it will be above the peer median.”

Published in The Express Tribune, August 21^st, 2016.

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