Fitch holds Turkey rating at BB; outlook negative

WASHINGTON

Fitch Ratings affirmed Turkey's credit rating at "BB" with a negative outlook on Friday.

Turkish economy is navigating out of a "sharp depreciation" of the lira, which "stemmed from the materialisation of external financing vulnerabilities, aggravated by political and geopolitical developments, all areas of weakness for the sovereign credit profile" the rating agency said in a statement.

The lira tumbled as much as 47 percent against the dollar in August. Turkish President Recep Tayyip Erdogan described the surge in USD/TRY rate as "evidence of an attempted economic assassination.”

The currency recovered most of its losses after significant tightening by the country's central bank.

The Central Bank of the Republic of Turkey (TCMB) increased its benchmark lending rate from 17.75 percent to 24 percent in mid-September.

In its latest monetary policy committee meeting that ended Dec.13, TCMB held its key rate stable at 24 percent.

Citing declaration in growth, "The slowdown will challenge a long-standing commitment to fiscal discipline that underpins strong public finances relative to rating peers," Fitch Rating said.

The Turkish economy expanded by 1.6 percent year-on-year in the third quarter the country's statistical office announced Dec.10.

"The negative outlook reflects the significant and multifaceted risks to the adjustment path posed by economic policy settings, domestic political and geopolitical risks and global financing conditions" Fitch said.