Fitch downgrades Turkey

Fitch Ratings said it downgraded Turkey's long-term foreign-currency issuer default rating to BB+ from BBB-.

The issue ratings on Turkey's senior unsecured foreign-currency bonds were also downgraded to BB+ from BBB-.

In addition, Fitch affirmed the long-term local-currency issuer default rating at BBB-, along with the ratings on Turkey's senior unsecured long-term local-currency bonds at BBB-.

The outlook is stable.

The country ceiling was revised to BBB- from BBB and short-term foreign-currency issuer default rating was downgraded to B from F3.

The short-term local-currency issuer default rating was affirmed at F3 and the issue ratings on Turkey's senior unsecured short-term local-currency bonds were affirmed at F3.

The issue ratings on Turkey's Hazine Mustesarligi Varlik Kiralama Anonim Sirketi's foreign-currency global certificates were downgraded to BB+ from BBB-. The ratings on Hazine's local-currency global certificates were affirmed at BBB-.

The downgrades reflect political and security developments in the country, which have undermined economic performance and institutional independence, Fitch said.

While the political environment may stabilize, significant security challenges are set to remain, the agency said.

A constitutional reform process is progressing, which, if approved in a referendum likely to be held in March or April, would entrench a system in which checks and balances have been eroded, Fitch said.

The country’s economic growth fell sharply in the second half of 2016 and is expected to recover to a pace that is well below the country's performance in recent years, the agency said.

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