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Capital Markets

Turkish DCM shrugs off S&P snub

The effects of Standard & Poor’s reduction of outlook on Turkey have been muted, while some sectors of the country’s debt capital markets hobble along at their own pace.

Turkey’s government and financial sector are, 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

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