From tweets to public outrage: understanding Turkey's bitterness towards credit rating agencies
The Fitch statement from Monday -- which some observers interpreted as fairly balanced -- warned that the Turkish economy is not immune from political risks.
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Economy Minister Nihat Zeybekçi responded harshly to a statement from global ratings agency Fitch via tweets that he posted on Tuesday morning, adding a new statement to a number of previous criticisms from the government regarding international rating agencies.
The Fitch statement from Monday -- which some observers interpreted as fairly balanced -- warned that the Turkish economy is not immune from political risks. “Erdoğan's outright victory in Sunday's [Aug. 10] vote, in the first round of Turkey's first popular presidential election, does little to ameliorate the political risk to Turkey's sovereigncredit profile,” said the ratings agency in its statement.
“Turkey has been remarkably resilient to recent external shocks and banks and corporates continue to enjoy high roll-over rates, but we expect political risk to remain a credit weakness that could lead to a negative rating if it adversely affects government effectiveness and policy predictability,” Fitch said.
The ratings agency also referenced the 2013 Gezi Park protests as well as the corruption scandal that broke on Dec. 17 of last year, emphasizing that “political continuity cannot eliminate political and social unrest.”
Responding to Fitch's assessment, Zeybekçi said in one tweet: “One would have to be blind and ignorant to not see Fitch's evaluation as malicious.”
“On the morning following the most important and democratic elections in our history, it is not possible for us to take institutions who warn of political risks as objective,” he said in a subsequent tweet.
Zeybekçi went on to issue a more general critique of the agency. “Fitch and similar institutions were unable to foresee economic developments such as the 2008 economic crisis and others,” he said in another tweet.
Zeybekçi slammed credit rating agency Moody's in April after it downgraded Turkey's ratings outlook to “negative” from “stable,” and criticized the agency again last week when it opted to forego the announcement of its latest credit rating for Turkey.
President-elect Recep Tayyip Erdoğan is also known for frequently attacking the Turkish Central Bank after it significantly raised overnight borrowing and lending rates in January amid a plummeting lira. Subsequent gradual interest rate cuts were criticized by Erdoğan, who felt they were insufficient.
Experts indicate that Zeybekçi's pointed remarks have already created resentment in the market.
“Unfortunately the minister's comments are very damaging for market sentiment -- as reflected in the performance of the 2Y benchmark bond this morning -- higher by 17 bps. The problem is that the market is uncertain now who will be PM, and who will assume the key positions covering the economy in the new cabinet,” said Standard Bank's Timothy Ash in an emailed note on Tuesday.
Ash said that while ratings agencies have mistakenly evaluated Turkey in recent years, interpreting Fitch's recent statement as politically motivated would also be incorrect.
“Erdoğan needs to move quickly by nominating strong, investor/market friendly individuals to key positions, or else this could get ugly, quite fast. The fact that President [Abdullah] Gül has been sidelined in effect from assuming a key role in the leadership of the Justice and Development Party [AK Party] is sending a signal that the more pragmatic wing of the party, including Gül, [Deputy Prime Minister Ali] Babacan, [Finance Minister Mehmet] Şimşek, et al are being sidelined, in favor of less experienced individuals,” said Ash.
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