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S&P Downgrades Turkey's Sovereign Credit Rating after Coup Bid

Ratings agency S&P on Wednesday downgraded Turkey's sovereign credit rating after Friday's failed coup bid.

"Following the attempted coup in the Republic of Turkey on July 15, we believe the polarization of Turkey's political landscape has further eroded its institutional checks and balances," said the agency.

"In addition, we expect a period of heightened unpredictability that could constrain capital inflows into Turkey's externally leveraged economy," S&P added in a statement after lowering the foreign and local currency sovereign credit ratings a notch.

"The negative outlook reflects our view that Turkey's economic, fiscal, and debt metrics could deteriorate beyond what we expect, if political uncertainty contributed to further weakening in the investment environment, potentially intensifying balance-of-payment pressures," S&P warned, saying it had put Ankara on negative watch.

The ratings firm judged that given the apparent political fragmentation of the country following the coup, Turkey's institutional effectiveness had been further eroded.

"We believe these events will make rolling over Turkey's substantial short-term external debt more challenging."

S&P estimated Turkey must roll over just under half of its total external debt -- which it put at around $170 billion -- over the next 12 months.

It added that "given the political uncertainty, Turkey's policymakers will likely stray from their commitment to enact reforms intended to wean the economy away from its dependence on foreign financing." Turkey earlier faced fresh accusations it was flouting the rule of law after purging some 50,000 people after the coup attempt.

Authorities have rounded up or sacked tens of thousands of police, judges, teachers and other civil servants from across the state bureaucracy in the aftermath of Friday's failed bid to seize power by disgruntled elements in the military.

Source: Agence France Presse


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