Turkey’s government and financial sectorare, once again, up in arms about a ratings agency decision. This time it’s Standard & Poor’s, which on May 1 reduced its outlook on Turkey’s long-term credit rating from positive to stable. Although this does not amount to a full downgrade, it is an obstacle in Turkey’s protracted quest for investment-grade status.
Turkey’s prime minister, Recep Erdogan, went so far as to declare that the government no longer recognized S&P as a ratings agency. The announcement, and subsequent criticism of it, has led to a glut of rumours on the topic – with S&P even feeling compelled to issue a statement denying that it had apologized to the government for alleged mistakes in the downgrade.
S&P’s announcement seems to have come at an odd time. The main criticism of Turkey is its large current account deficit, which has widened because of increasing oil prices. S&P had noted in February that Turkey was the most closed of the 19 emerging market economies it was surveying at the time, with exports amounting to only 23% of GDP. However, the current account deficit is falling, and has been for some months. In March it stood at $6.1