Turkey hits out at Moody's after credit rating cut

Turkey on Saturday lambasted Moody's ratings agency after it cut Ankara's credit rating further into junk territory, saying the downgrade raised concerns over the institution's "objectivity and impartiality". The agency downgraded the long-term debt rating to B1 from Ba3 and said it maintained the negative outlook for Turkey, in a statement late Friday.
Although the country had a "large, diverse economy" and government debt was low, Moody's said this was outweighed increasingly by "continued erosion in institutional strength and policy effectiveness on investor confidence".
But the Turkish treasury and finance ministry said the move was "incompatible with the Turkish economy's fundamental indicators". "As a result this raises questions over the objectivity and impartiality of the body's analyses," the ministry added in a statement.
It pointed to rising tourism revenues, falling inflation and a new judicial reform package as examples of "very positive developments that we sadly see are being ignored". The Turkish economy entered into recession for the first time in a decade last year following a currency crisis in the summer amid tensions with the United States.
But last month official data showed Turkey exited the recession with 1.3 percent growth in the first quarter of 2019, although analysts say the return to growth could be temporary. Moody's also said the latest downgrade reflected the view of a continued rising risk of a balance of payments crisis, "and with it the risk of a government default."
The agency said the negative outlook was maintained because of possible instability caused by the re-run of the Istanbul mayoral election on June 23 and the fear of US sanctions against Turkey over Ankara's purchase of a Russian missile defence system. The US says if Turkey purchases the S-400 system, it faces penalties under an act which prohibits business with Russia's state and private defence and intelligence sectors.
"The sanctions which the US Congress will consider if the purchase goes ahead, while largely undefined to date, cast a further shadow over Turkey's economy and financial system," Moody's said.