WASHINGTON, United States —
Fitch Ratings on
Friday downgraded Turkey's debt from BB- to B+ with a negative outlook, citing
high inflation and a lack of confidence in policymakers to turn the tide.
اضافة اعلان
The downgrade comes after data released
earlier in the month showed inflation hitting a two-decade record of nearly 50
percent in January, though some economists estimate it is much higher than
that.
"Policy-driven financial stress
episodes of higher frequency and intensity have increased
Turkey's
vulnerabilities in terms of high inflation, low external liquidity, and weak
policy credibility," Fitch said in announcing its decision.
The agency added that it "does not
expect the authorities' policy response" to "sustainably ease
macroeconomic and financial stability risks."
Although inflation is rising across the
world, thanks in part to easy money policies adopted to cushion the blow of the
COVID-19 pandemic, Turkey's problems are dramatically more acute because of
President Recep Tayyip Erdogan's unorthodox economic approach.
Erdogan rejects the idea that inflation
should be fought by hiking the main interest rate, which he believes causes
prices to grow even higher — the exact opposition of conventional economic
thinking.
The price spike complicates the president's
path to re-election in 2023, and Fitch warned there was a "high" risk
of "additional destabilizing monetary policy easing or stimulus
policies" ahead of the polls.
"There is an elevated degree of
uncertainty about the authorities' policy reaction function in the event of
another episode of financial stress, as political considerations limit the
central bank's ability to raise its policy rate," Fitch added.
The government hopes inflation will fall
after pressures — including a minimum wage hike in January and rising energy
bills — subside and new currency support measures kick in.
The central bank paused a four-month streak
of interest rate cuts in January, providing relief for the lira, which has held
largely steady this year.
Fitch's decision comes after S&P Global
Ratings in December downgraded its outlook for Turkey's debt to negative from
stable.
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