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Fitch cut Turkey’s sovereign borrowing status to junk , losing last major investment-grade rating

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by: Mehreen Khan,

The blows just keep coming for Turkey. 

Fitch has become the latest major rating agency to cut Turkey’s sovereign borrowing status, stripping the country of its last remaining investment grade rating with a major ratings agency. The rating was lowered to BB+ from BBB-.

In a statement late on Friday, Fitch said:

Political and security developments have undermined economic performance and institutional independence. While the political environment may stabilise, significant security challenges are set to remain.

It marks a clean sweep of junkings for Turkey with Fitch following S&P and Moody’s in downgrading the country in the wake of a failed military coup in July.

The downgrade means Turkey’s domestic banks will now face higher funding costs to access central bank loans at a time when growth has fallen to its lowest since 2009 and investors have dumped the currency.

The lira has faced the brunt of worries about persistent security problems, collapsing tourism revenues and unprecedented moves to undermine parliamentary democracy through a landmark major constitutional reform.

Source: https://www.ft.com/content/feb883bd-577f-31c6-b977-1c8082eccbad

Fitch rates Armenia’s Yerevan “B+”, says outlook Stable

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armenia-b-plusFitch Ratings has assigned Armenian capital city of Yerevan Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) of “B+” and a Short-Term Foreign Currency IDR of “B,” it said in a statement.

The Outlooks on the Long-Term IDRs are Stable. The ratings reflect Yerevan’s status as Armenia’s capital, satisfactory budgetary performance, supported by steady transfers from the central government, and a debt-free status.

In its base case scenario, Fitch expects the city to maintain satisfactory fiscal performance with an operating margin of 2%-3% in 2016-2018 (2011-2015: average 7.5%). The lower than historical margins will be driven by continued adjustment of the city’s operating revenue to negative shocks resulting from the protracted slowdown of Armenia’s economy in 2014-2015.

“We also expect Yerevan to run a slight surplus before debt variation of 1%-2% of total revenue in 2016-2018, after an average deficit of 1% in 2011-2015. Fitch projects Yerevan city’s operating revenue will total AMD78bn in 2016, up 3% yoy,” a statement said.

“Capital spending is likely to decrease slightly to about AMD7bn-AMD8bn in 2016-2017 (2015: AMD9bn) before rising to about AMD10bn in 2018. It will likely remain at below 10% of total expenditure, significantly below the average of 22% in 2011-2015, when the city made material infrastructure investment funded by state transfers and donor grants.”