Turkey slams timing of S&P pre-poll downgrade

Turkish President Recep Tayyip Erdogan addresses the crowd during AK Party’s 6th ordinary provincial congress in Izmir on April 28, 2018. Erdogan has announced snap presidential and parliamentary elections on June 24 instead of November 3, 2019 to fully legalize a new executive presidency boosting the powers of head of state. (Turkish Presidential Press Service via AFP)

ISTANBUL: Turkey on Wednesday lashed out at a debt downgrade by ratings agency S&P as dubiously timed less than two months ahead of elections and based on lackluster analysis.
S&P on Tuesday dropped Turkey’s foreign currency debt ratings to a speculative ‘BB-/B’ for long- and short-term issues respectively, citing deteriorating finances and rising inflation.
Deputy Prime Minister Mehmet Simsek, the government’s pointman on the economy, accused S&P of deliberately bringing forward a ratings assessment initially planned for August to before June 24 polls.
“It is clear that the decision was brought forward to an earlier date,” he wrote on Twitter, accusing the agency of “incorrect timing.”
“The analysis of S&P is also inadequate,” he added.
President Recep Tayyip Erdogan has announced snap presidential and parliamentary elections on June 24 instead of November 3, 2019 to fully legalize a new executive presidency boosting the powers of head of state.
A potentially worsening economic climate is seen as one of the reasons behind Erdogan’s abrupt move although this has been rejected by government officials.
The country posted a strong growth of 7.4 percent last year but the data failed to douse fears over the underlying health of the economy, in particular that it is overheating with high inflation, a weak currency and wide current account deficit.
S&P said: “Our downgrade reflects our view that there is a risk of a hard landing for Turkey’s overheating, credit-fueled economy.”
But Simsek said overheating fears were “a story of 2017” as the increases in credit volumes slowed down in 2018, financial conditions were tighter and the central bank had also acted by raising rates.
He said the deterioration in the current account deficit was likely to be temporary and vowed reforms would be accelerated after the elections.
Markets responded positively to the elections being brought forward from the original date of November 2019 which has reduced the political uncertainty, he said.
The robustness of Turkey’s economy has always been a political ace of Erdogan since his ruling Justice and Development Party (AKP) first came to power in 2002.
Erdogan credits himself with rescuing the country from the chaos that brought it to near financial meltdown in the 2000-2001 crisis to create an “Anatolian tiger” with thriving industry and services.