Fitch Ratings on Jan. 27 downgraded Turkey's long- and short-term foreign-currency issuer default rating to BB+/B from BBB-/F3, stripping the country of its last remaining investment-grade status from a major credit rating agency in the wake of the failed military coup in July 2016.
The agency also revised the country ceiling down to BBB- from BBB and affirmed the long- and short-term local-currency issuer default ratings at BBB-/F3. The outlooks on the long-term issuer default ratings are stable.
The downgrade reflects the growing constraints on the country's economic performance and institutional independence due to political uncertainty and significant security challenges following the failed coup.
Fitch noted that the country continues to be in a state of emergency because of the continued "purge" of supporters of the group that the government holds responsible for the coup attempt, resulting in the deterioration of confidence in the country's economy. More than 100,000 individuals have been dismissed or suspended from the public and private sectors since the coup attempt, while thousands more have been arrested, Reuters said in a same-day report.
The agency also stressed that a proposed constitutional reform that pushes for an executive presidency would "entrench a system in which checks and balances have been eroded." The plan is due to be put in a referendum likely to be held in March or April, Fitch noted.
S&P Global Ratings the same day revised to negative from stable its outlook on Turkey's unsolicited long-term foreign- and local-currency ratings, citing risks to the country's economy from policy constraints, rising inflation, and exchange rate and balance-of-payments pressures.
S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.