Fitch, the international credit rating agency, has downgraded Turkey’s rating citing “Political and security developments” which it believes “have undermined economic performance and institutional independence.”
Although widely expected in Turkey and by international markets, Fitch’s decision mounts further scrutiny on the country’s direction from a once gleaming emerging market to an economy for which none of the international ratings agencies deems investable.
Fitch’s rival Standard Poor’s had already downgraded Turkey from “stable” to “negative” citing political insecurity after last year’s coup attempt and pressure on the central bank after Turkish President Erdogan had on several occasions accused it of serving the interests of the international “interest rates lobby”. Turkey did not fare better in Fitch’s report as political instability and institutional independence were also cited.
“A constitutional reform process is progressing, which, if approved in a referendum likely to be held in March or April, would entrench a system in which checks and balances have been eroded, in Fitch’s opinion. The purge of the public sector of the supporters of the group that the government considers responsible for the coup attempt in July has continued and a state of emergency remains in place. The scope of the purge, which has extended to the media and other groups, has unnerved some participants in the economy. High-profile terrorist attacks have continued, damaging consumer confidence and the tourism sector” the report reads.
Turkish President Erdogan has a running battle with what he calls “the interest rate lobby” and has claimed on several occasions that an economic war is being waged against his country. The rising Dollar in Turkey has many worried, prompting government circles to claim that “anyone purposefully investing in the Dollar is a traitor”. Many eyes – both domestically and internationally – will be on the constitutional referendum process, which itself is a costly procedure, that will restructure Turkey’s political and, by all accounts, economic future.