Moody’s downgrades Turkey, debt

Moody's Investors Service said it downgraded Turkey's long-term issuer and senior unsecured bond ratings to Ba1 from Baa3 and assigned a stable outlook.

This concludes the review for downgrade that was initiated on July 18.

Moody’s said the drivers of the downgrade are as follows:

• The increase in the risks related to the country's sizeable external funding requirements; and

• The weakening in previously supportive credit fundamentals, particularly growth and institutional strength.

The stable outlook balances downside risks arising from the erosion in Turkey's economic resilience and increasing balance of payments pressures against credit-positive considerations arising from its large and flexible economy which continues to register positive growth and the government's strong fiscal track record, the agency added.

Concurrently, Moody's downgraded the senior unsecured bond rating of Hazine Mustesarligi Varlik Kiralama AS, a special purpose vehicle wholly owned by the Republic of Turkey, to Ba1 from Baa3 and assigned a stable outlook.

In conjunction with this actions, the agency also lowered Turkey's long-term foreign-currency bond ceiling to Baa2 from Baa1 and its long-term foreign-currency deposit ceiling to Ba2 from Baa3.

The short-term foreign-currency deposit ceiling was lowered to NP from P-3 and the country's short-term foreign-currency bond ceiling to P-3 from P-2. Furthermore, the local currency bond and deposit ceilings were lowered to Baa1 from A3.

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