Turkish Prime Minister Recip Tayyip Erdogan on Thursday slammed international ratings agency Standard & Poor’s for lowering the country’s long-term credit outlook. The credit ratings firm downgraded Ankara’s outlook on the same day it upgraded Greece’s credit grade.
Turkey’s outlook was lowered from positive to stable, meaning it is no longer considered for an upgrade of its credit rating. S&P cited concerns over government debt for the move. Neighbouring Greece got an upgrade of its ratings after finalising a major debt writedown with private creditors.
“From now on, we do not recognise you as a ratings agency,” said Recep Tayyip Erdogan, adding that S&P’s ratings decisions this week were “ridiculous.”
S&P claimed on Wednesday that despite a decade of sound economic growth and development, Turkey continues to suffer from several structural weaknesses.
“Its economy is fairly closed, with exports accounting for a small share of GDP (about 24% in 2011),” S&P said in a statement. The credit agency insisted that Turkey’s current account deficit is huge and the country highly depends on short-term financing from outside.
“As a result, Turkey is particularly vulnerable to sudden financial account outflows and refinancing risks,” it warned.
However, S&P commended Turkey’s key reforms introduced this year including the revision of commercial code and legislation of capital markets law that would make companies financially more transparent and enable market participants as well as rating agencies to better understand corporate risk.
“It’s almost revolutionary regulatory reform. These changes could set the stage for the creation of a local investor base, the development of domestic capital markets, and even more growth in the future,” Standard and Poor said in its statement.
Turkey insists its economy may grow more than the forecasted 5% this year, in stark contrast with many economists’ forecasts who believe unrest in neighbouring Syria will slow down growth. The International Monetary Fund, meanwhile, has cautioned Ankara about rising inflation in the country.
On Thursday, Turkey’s statistics institute announced consumer prices rose 11.1% during Q1, while producer prices grew 7.6%.