International credit rating agency S&P Global Ratings (Standard & Poor's Ratings Services) has announced that it has affirmed its unsolicited foreign and local currency sovereign credit ratings for Turkey at 'BB' and 'BB+', respectively, while the outlooks on both ratings remain negative.
S&P stated that the negative outlook on Turkey reflects risks that a change in external financial conditions could eventually restrict Turkey's financial and corporate sectors' ability to roll over their large external debt, with negative implications for the country's leveraged economy. An external shock might also occur via geopolitical developments, for example through the imposition of US sanctions on one or more Turkish financial institutions, according to the credit rating agency.
S&P also stated that it could downgrade Turkey if monetary policy proves inadequate to curb inflation and currency pressures, which could intensify due to Turkey's reliance on volatile portfolio inflows to finance its sizable current account deficit.
The credit rating agency could revise the outlook to stable if Turkey's fiscal position continued to support a reduction of the government's debt-to-GDP ratio and inflationary pressures abated, likely reflecting a stabilization in the value of the Turkish lira, gradually improving growth prospects, and a more balanced external position.
Meanwhile, S&P forecasts that real GDP growth in Turkey will slow to four percent this year and average 3.2 percent over 2019-2021 but, as in the past, these projections are subject to uncertainty.