S&P Cuts Turkey’s Credit Rating to BB/B with Negative Outlook

turkeyTurkey’s largest ETF fell again on Wednesday, following a big downgrade from Standard & Poor’s on the country’s credit rating.

S&P cut Turkey’s credit rating to BB/B, pushing the beleaguered nation’s rating into junk status. Further, the ratings agency noted its outlook is Negative, citing several economic and political risks. From S&P:

  • Following the attempted coup in the Republic of Turkey on July 15, we believe the polarization of Turkey’s political landscape has further eroded its institutional checks and balances.
  • In addition, we expect a period of heightened unpredictability that could constrain capital inflows into Turkey’s externally leveraged economy.
  • As a result, we are lowering our foreign and local currency sovereign credit ratings on Turkey to ‘BB/B’ and ‘BB+/B’, respectively, from ‘BB+/B’ and ‘BBB-/A-3’.
  • The negative outlook reflects our view that Turkey’s economic, fiscal, and debt metrics could deteriorate beyond what we expect, if political uncertainty contributed to further weakening in the investment environment, potentially intensifying balance-of-payment pressures.

The Ishares Msci Turkey Inv Market Index Fd (NYSE:TUR) fell $0.76 (-2.05%) to $36.25 in midday trading Wednesday following the downgrade. TUR is now nearly flat on the year, with plenty of downside potential.

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