Ratings agency S&P has cut Turkey's credit rating due to rising political uncertainty. President Recep Tayyip Erdogan said domestic and international investors shouldn't be concerned.
Ratings agency S&P has cut Turkey’s credit rating.
It cited rising political uncertainty after the failed coup attempt and government declaring a state of emergency and warned the economy could be undermined and international investors scared off.
Turkish shares fell further on Thursday along with the currency, the lira, which at one stage hit a near record low against the dollar.
President Recep Tayyip Erdogan dismissed the downgrade saying: “S&P should not mess with Turkey.”
He went on: “Domestic and international investors in our economy shouldn’t have the slightest concern with regard to the implementation of the state of emergency. S&P – what do you have to do with Turkey? Turkey is not one of your members. This institution has done the similar things previously and we told them we no longer wanted to have ties with them.”
Investors aplenty for Turkey
One senior Turkish economic analyst says the country should not suffer long-term economic consequences from the coup attempt and will not lack for investors as there is plenty of money in the world chasing high returns.
Selva Demİralp, Associate Professor of Economics, KoÇ University explained: “Turkey does have a current account deficit and investor sentiment is important but if you think about it, this horrible event took place at a lucky time when global liquidity is abundant. Like today there is the ECB decision, they’re going to continue with their quantitative easing. Bank of Japan likewise. So when there is so much liquidity in the system there is less of a concern about whether Turkey will be able to finance its external debt.”
However concerns over Turkey’s adherence to the rule of law have led to a drop of around 50 percent in foreign direct investment over the last three years – concerns which are likely to remain due to the current instability in the country.
Simsek puts his credibility on the line
Trying to address that the Deputy Prime Minister Mehmet Simsek said financial markets must understand that Turkey will survive the shock of a failed military coup.
He added his own credibility before investors depended on it.
“In circumstances like this, there is a knee-jerk reaction, it’s typical. I know that because I come from that business,” Simsek, who previously worked on Wall Street, told reporters in Ankara. “I need to retain my credibility. I need markets to understand that we are going to survive this shock.”
9. I'm confident #Turkey will come out of this with much stronger democracy, better functioning market economy & enhanced investment climate
— Mehmet Simsek (@memetsimsek) July 20, 2016
Simsek is seen as anchoring investor confidence in Turkey’s ruling AK Party. On Thursday he took to television, Twitter and journalist roundtables to try to reassure them and shore up confidence.