Ratings agency Moody's on Friday cut its outlook for Turkey to "negative" from "stable", citing continuing erosion of its institutional strength - the latest hit for an emerging market struggling to win back investor favour. Once seen as one of the world's most promising emerging markets, Turkey has been hurt by deepening investor concerns about political uncertainty following last year's failed coup, as well as central bank independence and slowing growth.
More than 100,000 people have been sacked or suspended from the police, judiciary, civil service and private sector since the attempted putsch, and tens of thousands jailed. "The actions taken to reduce various forms of opposition to the government since July last year have undermined the country's administrative capacity and damaged private sector confidence," Moody's said in a statement.
"Partly as a consequence, Turkey has experienced a further slowdown in growth." The ratings agency also affirmed its "junk" non-investment grade of Ba1 on Turkey's debt, saying its economic and fiscal strength served as a buffer against the risks posed by its diminished institutional state. It also cited the economy's "intrinsic dynamism". When Moody's cut the rating to junk last year, it drew condemnation from the government and President Tayyip Erdogan. Rival agencies have followed suit. Fitch Ratings in January snuffed out Turkey's last remaining investment grade, when it downgraded it over widening concern about politics and monetary policy.
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