By Sydney Maki
Moody’s Investors Service downgraded Turkey’s debt rating citing an increase in the nation’s external vulnerabilities along with eroding fiscal buffers and institutional challenges.
The sovereign’s credit rating was cut to B2 from B1 on Friday, putting it on par with Egypt, Jamaica and Rwanda. The company kept a negative outlook on the country, saying fiscal metrics could deteriorate faster than currently expected.
“Turkey’s external vulnerabilities are increasingly likely to crystallise in a balance of payments crisis,” Moody’s analysts Sarah Carlson and Yves Lemay wrote in the announcement. “As the risks to Turkey’s credit profile increase, the country’s institutions appear to be unwilling or unable to effectively address these challenges.”
Gross foreign-exchange reserves excluding gold have fallen more than 40% this year to $44.9 billion as of Sept. 4, putting pressure on the nation’s ability to sustain its balance of payments, according to the analysts. Moody’s also warned of rising geopolitical risks.
Turkey’s long-term foreign currency rating is B+ by S&P Global Ratings and BB- by Fitch Ratings.