Moody’s on Friday downgraded Turkey’s rating to ‘B2’ from ‘B1’, saying the country’s external vulnerabilities are likely to result in a balance of payments crisis and that its fiscal buffers were eroding.
“As the risks to Turkey’s credit profile increase, the country’s institutions appear to be unwilling or unable to effectively address these challenges,” the ratings agency said in a statement.
Turkey’s trade deficit soared 170% to $6.31 billion in August, trade ministry data showed, as record drops in the lira currency set locals on a rush to buy gold and on concerns over depleted foreign exchange reserves currencies.
Turkey’s reserves have been drifting downward for years, but are now at a multi-decade low as a percentage of GDP because of the central bank’s unsuccessful attempts to defend the lira since the beginning of 2020, the agency said.
Moody’s maintained the country’s outlook at negative, citing elevated levels of geopolitical risk that could accelerate any crisis – its relationship with the United States, the European Union and tensions in the Eastern Mediterranean.