Turkey pushed to junk by Moody’s but Erdogan remains defiant

The Rating agency Moody’s has cut Turkey’s long-term issuer and senior unsecured bond ratings by one notch to Ba1 with a ‘stable’ outlook on Friday, which means the country is basically junk rated.

Majorly, two decisions were cited by Moody’s for the rating cut.

• The increase in the risks related to the country’s sizeable external funding requirements.
• The weakening in previously supportive credit fundamentals, particularly growth and institutional strength.

The agency said it expects that the deterioration in Turkey’s credit rating will continue over the next two to three years.

Another rating agency, S&P Global ratings, has already downgraded Turkey’s rating to junk after the attempted coup in July. Turkey still enjoys lowest investment grade credit rating from Fitch but that has been put to review earlier this month for a possible downgrade.

Despite these rating changes, Turkey’s President, Recep Tayipp Erdogan remains defiant and indicated that the political changes that are being pursued in Turkey would continue. He said that the rating agencies are making mistakes. “I don’t care at all, they’re making mistakes and they’re doing it intentionally,” he said to Bloomberg. He accused the agencies of acting not from the economic point of views but being politically motivated. He said, “On the other hand, they’re either freezing or going towards cutting a country that’s standing on its feet, that’s upright, and where investments are continuing.”

Turkish Lira is down sharply and now testing support around 3 per dollar. It is likely to slide further towards 4.