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The global credit rating agency Standard and Poor's (S&P) downgraded the credit rating of Turkey from BB/B to BB-/B yesterday (May 1).
The exchange rate of US dollar to Turkish Lira (TRY), which was around 4.10 TRY early in the morning, has become 4.16 TRY later in the day, indicating that the Lira has depreciated by around 1.5 percent against US Dollar. As of 3.45 p.m., the depreciation of the Turkish Lira against Euro has also become almost 1.5 percent.
In the statement published by the S&P, the following statement was made about Turkey:
"Our downgrade reflects our view that there is a risk of a hard landing for Turkey's overheating, credit- fuelled economy. In our view, this is reflected in the rising imbalances in Turkey's economy, most notably in its widening debt-financed current account deficit and high inflation. The ongoing weakness of the Turkish lira is not only fuelling inflation, but also amplifying risks related to Turkey's high external debt."
Deputy Prime Minister Şimşek: "It is meaningful in terms of timing"
Posting a tweet on his official Twitter account about the decision of the S&P, which previously stated that the interest rate hike made in the late liquidity window facility would not be sufficient to reach the inflation target of 5 percent set by government, Deputy Prime Minister Mehmet Şimşek has written, "The timing of the credit rating downgrade is highly meaningful!" Şimşek has also added:
"Global credit rating agency S&P was previously planning to review the credit rating of Turkey in August. It can be clearly seen that this decision has been moved to an earlier time. Has there been a development which has made it necessary for them to move the downgrading to an earlier time?" (ŞA/SD)
