Moody Slashes Turkey's Economic Growth Forecast to 2.5 Percent Due to Coronavirus

Published March 10th, 2020 - 06:20 GMT
Moody Slashes Turkey's Economic Growth Forecast to 2.5 Percent
Turkey had closed its borders with Iran and halted flights to and from it after the hight number of coronavirus cases reported there. (Shutterstock)
Highlights
Meanwhile, the Ministry of Health has affirmed that the country is virus-free.

Credit rating agency Moody's has downgraded its forecast for the growth of the Turkish economy in 2020 to 2.5 percent instead of three percent.

It said this decline is due to its failure to acknowledge Coronavirus infections among citizens despite news of its spread in the country.

In its previous report for 2019, Moody's maintained Turkey’s credit rating at B1 with a negative outlook.

Reports have indicated possible outbreaks of coronavirus in Turkey, yet authorities hide such news, following the announcement of the death of a Turkish old man in France affected by the virus.

Meanwhile, the Ministry of Health has affirmed that the country is virus-free.

In a step aimed at curbing rumors about the virus and its spread in Turkey, the General Directorate of Security announced launching an investigation on the publication of any false information in this regard, especially on social media.

Despite the outbreak of coronavirus in most countries neighboring Turkey, especially Iran, no case has been reported in the country yet.

However, media has indicated that Nigeria, Singapore, Israel, and Estonia discovered cases of the virus coming onboard Turkish Airlines.

Turkey had closed its borders with Iran and halted flights to and from it after the hight number of coronavirus cases reported there.

Turkey, other lower-rated emerging markets, and some oil producers will face the biggest pressure on credit ratings from the coronavirus, one of Standard and Poor’s (S&P) Global’s top sovereign analysts said on Friday.

The number of global infections has surpassed 100,000, while widespread shutdowns and travel restrictions are raising concerns of a potential global recession.

Credit rating agency S&P has been among those cutting growth forecasts in recent days and Frank Gill, its senior director of Europe, Middle East, and Africa sovereign ratings, said certain countries’ ratings could also be vulnerable.

“It is not good news for anyone, least of all emerging markets,” he said. “Where this could cause most distress is the speculative-grade countries in the single B space.”

The main issue is whether countries will be able to cope with a major increase in cases, especially if they have less advanced healthcare systems, or if they depend heavily on tourism or plunging commodities like oil.

Another worry is if domestic currencies tumble, making it more costly to pay debt borrowed in major currencies like dollars.

S&P currently has the country on a B+ rating with a stable outlook, but Turkey’s large tourism sector which accounts for around 13 percent of its economy, was one of the bright spots last year and “this coronavirus epidemic is clearly going to weigh on any tourism economy in 2020.”

The country’s banks also have a lot of refinancing to do over the next 12 months. At $61.5 billion, that is roughly eight percent of Turkey’s GDP. “That is a lot,” Gill said.

Turkish companies have around $74 billion in external debt including trade credits and though the government itself only has around five billion dollars to refinance this year, there are three large state-owned banks that would need support in a crisis.

“When you see pressure on the lira, that immediately weighs on the creditworthiness of the private sector. So that is not great news,” he stressed.


Copyright © Saudi Research and Publishing Co. All rights reserved.

You may also like

Subscribe

Sign up to our newsletter for exclusive updates and enhanced content