Fitch Ratings downgraded Turkey’s credit rating to “negative.”

Fitch Ratings downgraded Turkey’s credit rating outlook to “negative,” stating that monetary easing, which it described as “premature,” caused a deterioration in domestic confidence. It was stated that Turkey’s credit rating was also confirmed as “BB-.”

“The Fed’s early interest rate cuts or additional economic stimulus ahead of the 2023 elections are eroding domestic confidence,” the Fitch report said. This situation manifests itself as a sharp decline and rising inflation in the lira, including unprecedented volatility during the day.

Fitch analyst Erich Arispe Morales stated that the erosion in question was reflected in the weakening lira and pointed out that this created macroeconomic and financial stability risks that could increase financing pressures.

Fitch had set Turkey’s rating at BB-, three notches below investment grade. This grade level also includes Brazil and South Africa.

“Turkish Banks are Under Pressure”

In the report published by the credit rating agency, it was reminded that the operational environment score of Fitch for the Turkish banking sector is ‘B+,’ and it was stated that this score reflects “Turkey’s macro and political volatility, currency weakness, inflationary pressures, and investor perception.”

Also, it was stated that “Banks are under pressure due to operational environment volatility, significant foreign currency borrowing, high TL interest rates and their relations with high-risk sectors such as construction, real estate, energy, and tourism.”