During the Central Bank of the Republic of Turkey's (CBRT) annual meeting to unveil the first inflation report of the new year, CBRT Governor Murat Çetinkaya assessed the controversial downgrade of Turkey's credit rating by Standard and Poor's (S&P) and Fitch on Friday.
Both international rating agencies downgraded Turkey's long-term foreign currency issuer default rating from BBB- to BB+, and simultaneously lowered the country's senior unsecured foreign currency bond rating from BBB- to BB+, while downgrading Turkey's overall financial outlook from "stable" to "negative." Çetinkaya, however, said that the CBRT was not on the same page regarding the downgrades.
"I cannot say that we agree on S&P's evaluations. Before making such decisions, the qualification of shock should be well degraded, major trends should be monitored for a period of time and the possible effects of policy measures should be evaluated by technical analysts. We see that S&P did not take these three crucial steps. Therefore, we consider this to be a rushed decision. As the CBRT, we have taken the correct measures at the most accurate time," he said, adding that the CBRT was responsible for taking such decisions into close consideration.
In addition, evaluating Fitch's decision to downgrade Turkey's credit rating to BB+, Morgan Stanley, a world-renowned financial services company, said that Turkey could secure its rating over a very short span of time. It also indicated that the Fitch decision to downgrade the country's credit rating were more likely influenced by political outlook and security issues, rather than fundamental economic indicators. According to Morgan Stanley hose countries that lose their "investment grade" rating have won back their ratings within a period of 6.1. years on average, adding that any increase in credit ratings depends on economic growth and decreasing the national debt. "Taking into consideration the fact that Turkey outperforms countries similar to itself in terms of growth and fiscal discipline, the country can earn back its rating in less than 6.1 years," said Morgan Stanley.
Meanwhile, Eurasia Head of Japan Credit Rating (JCR) Orhan Ökmen criticized the decisions by both Fitch and S&P, stating that not introducing a change in the credit rating right before important events is a methodological commitment of rating agencies. "A change in rating without taking into consideration exceptional conjunctures creates injustice and unfairness, which is a well-known result," he said. "We should wait and see how the event on the agenda turnout as this is the most accurate way to prevent a prediction mistake, injustice and unfairness, added Ökmen.
