On February 7, Standard & Poor’s Ratings Services cut Turkey’s outlook to “negative” from “stable” because of the country’s fiscal and monetary policies and an “erosion” of governance standards.
The negative outlook reflects the ratings agency’s view that there is at least a one-in-three likelihood that the firm will lower its ratings on Turkey within the next 12 months. Note that S&P kept Turkey’s rating at BB+, one level below investment grade. Fitch Ratings and Moody’s Investors Service promoted Turkey to investment grade in 2012 and 2013 respectively.
In its press release, S&P said “We believe that Turkey’s fiscal and monetary policies have exposed the country to a potential hard landing as external conditions tighten…Turkey appears to have suffered an unanticipated erosion of institutional checks and balances and governance standards.” In addition, the company said that Turkey’s economy would probably grow an average of 2.2% in 2014 and 2015, cutting its forecast from 3.4%