Not changing its mind: Moody's maintains Turkey's negative ratings
Turkish President Recep Tayyip Erdoğan had repeatedly assailed against the Central Bank to sharply cut its interest rates to boost growth in the run-up to parliamentary elections.
Ratings agency Moody's maintained Turkey's 'negative outlook' on Thursday and kept its credit rating unchanged as concerns prevalent among foreign investors persist.
Moody's earlier said it won't make a public statement on Turkey if its credit rating remains unchanged. The rating agency maintained Turkey's Baa3 credit rating.
Last month, Moody's cited subdued economic growth and currency volatility to keep Turkey's banking sector's outlook as "negative" for the second straight year.
On Thursday, another credit rating agency Fitch said banks' role as Turkey's largest external borrowers leaves them vulnerable to sharp changes in investor sentiment.
Turkish President Recep Tayyip Erdoğan had repeatedly assailed against the Central Bank to sharply cut its interest rates to boost growth in the run-up to parliamentary elections, sending Turkish lira to record lows and shaking investor confidence. Turkish Prime Minister Ahmet Davutoğlu flew to New York last month to assure foreign investors that the Central Bank is independent and that the country's business environment is investment-friendly. Erdoğan's adviser Yiğit Bulut traveled to Washington on Thursday for the same mission.
Turkey unprecedented economic growth was largely driven by low borrowing costs thanks to Federal Reserve's low interest rates and financial crisis in advanced economies, leaving the country exposed to fluctuations in international markets. Turkish government's insistence on lowering interest rates signal that Ankara is still keen on pushing the credit-led growth despite Fed's impending rate hike.
Investors have fixed their gaze on Turkey's June 7 elections to see if Deputy Prime Minister Ali Babacan, highly respected by foreign investors, will remain in his seat.
Last month, Fitch kept its investment-grade rating on Turkey and affirmed its outlook, but cited concerns about the independence of the Central Bank.
Moody's will issues its next credit opinion on Turkey on Aug. 7 this year.
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