Moody's cuts Turkey's credit rating to 'junk'

Credit ratings agency Moody's Investor Service has downgraded Turkey's sovereign credit rating to non-investment grade citing worries about the rule of law following an attempted coup, risks from external financing and a slowing economy.

The agency, which cut the government's long-term issuer and senior unsecured bond ratings debt to Ba1 from Baa3, kept Turkey's outlook as stable, saying its "flexible" $720 billion economy and strong fiscal track record offset the balance-of-payments pressure it faces.

Moody's decision followed a reduction to two notches below investment grade by S&P Global Ratings in the immediate aftermath of the coup in July. Fitch Ratings is the only major ratings agency that has Turkey as investment grade. Fitch will review its assessment of Turkey at the beginning of 2017. President Recep Tayyip Erdogan has criticised the rating agencies for being politically motivated.

The Moody's rating cut may mean Turkey will have to pay more to borrow money on international markets.

Moody's said it expects Turkey's GDP to grow an average of 2.7 per cent in the next three years, compared with 5.5 per cent in the first four years of this decade.

REUTERS