Moody's Investor Services downgraded Turkey's credit rating deeper into non-investment grade territory, citing its worsening external vulnerabilities, eroding fiscal buffers and institutional challenges.
The agency downgraded Turkey's sovereign issuer and senior unsecured debt ratings to B2 from B1, five notches below investment grade, and maintained a negative outlook on the country. The rate cut puts Turkey on par with Tanzania, Rwanda and Jamaica.
"Turkey's external vulnerabilities are increasingly likely to crystallise in a balance of payments crisis," Moody's said. "As the risks to Turkey's credit profile increase, the country's institutions appear to be unwilling or unable to effectively address these challenges."
Moody's downgrade comes three weeks after Fitch Ratings revised its outlook on Turkey's long-term issuer default ratings to negative from stable. That revision was a result of the country's financial risks increasing due to a depletion of foreign exchange reserves, weak monetary policy credibility, negative real interest rates, and a sizeable current account deficit, partly fuelled by a strong credit stimulus.
Moody's maintained its negative outlook on Turkey, saying that fiscal metrics could deteriorate in the coming year at a faster pace than currently expected.
It also warned of "elevated levels" of geopolitical risk, given that Turkey's relationship with the US and the European Union as well as tensions in the eastern Mediterranean could accelerate a crisis.
Turkey's foreign-exchange reserves, excluding gold, have plunged more than 40 per cent since in the beginning of the year to $44.9 billion as of September 4, according to the ratings agency.
The country's foreign-currency reserves have been declining for years but are now at a multi-decade low as a percentage of gross domestic product (GDP) because of the central bank's unsuccessful attempts to defend the lira since the beginning of 2020.
Moody's forecasts that the country's external vulnerability indicator (EVI), a measure of the adequacy of foreign currency reserves to cover external debt repayments and non-resident deposits, will rise to 409 per cent in 2021 from 263 per cent in 2019. This represents higher exposure to changes in international investor sentiment.
Furthermore, dollarisation, the process of aligning a country's currency with the US dollar, has become a significant issue for Turkey that increases the risk of a balance of payments crisis, Moody's said.
Currently, political pressures, limited central bank independence, a slow reaction of the monetary authorities and a lack of predictability of their reactions, increases the probability of a "disorderly exchange rate and economic adjustment," the agency said.
While inflation remains well above target, the central bank has taken "only modest" action to tighten monetary policy. Moody's warned that the longer this continues, the more likely there will be "continued downward pressure" on the currency.
Turkey also suffers from labour-market "rigidities" that reduce job creation while productivity is also weak, Moody's said.
"Making structural changes that address these fundamental challenges can inflict short-term pain on the economy and the benefits of reform could take years to materialise," the agency said
Credit growth has remained high in 2020 due to measures taken by the central bank to support domestic demand during the Covid-19 pandemic. While some of the measures are being withdrawn now, credit growth will remain high through the end of 2020, according to Moody's.
In terms of fiscal performance, weak growth and measures to manage the economic fallout from the pandemic will widen the deficit in 2020. Moody's forecasts that it will rise to 7.5 per cent of the GDP.
The agency also forecasts the government debt burden will increase to 42.9 per cent in 2020 from 32.5 per cent in 2019.
"Under our baseline scenario, the return to growth after the economic shock of 2020 will not suffice to offset the impact on the upward debt trajectory of primary deficits of around 2 per cent and an increasing interest burden," Moody's said.
As a result, the agency expects Turkey's debt burden to increase to more than 46 per cent of the GDP in the coming years.
PROFILE OF HALAN
Started: November 2017
Founders: Mounir Nakhla, Ahmed Mohsen and Mohamed Aboulnaga
Based: Cairo, Egypt
Sector: transport and logistics
Size: 150 employees
Investment: approximately $8 million
Investors include: Singapore’s Battery Road Digital Holdings, Egypt’s Algebra Ventures, Uber co-founder and former CTO Oscar Salazar
HOW TO WATCH
Facebook: TheNationalNews
Twitter: @thenationalnews
Instagram: @thenationalnews.com
TikTok: @thenationalnews
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
The years Ramadan fell in May
Killing of Qassem Suleimani
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Background: Chemical Weapons
UAE currency: the story behind the money in your pockets
UAE currency: the story behind the money in your pockets
Volvo ES90 Specs
Engine: Electric single motor (96kW), twin motor (106kW) and twin motor performance (106kW)
Power: 333hp, 449hp, 680hp
Torque: 480Nm, 670Nm, 870Nm
On sale: Later in 2025 or early 2026, depending on region
Price: Exact regional pricing TBA
The specs
Engine: 4.0-litre flat-six
Torque: 450Nm at 6,100rpm
Transmission: 7-speed PDK auto or 6-speed manual
Fuel economy, combined: 13.8L/100km
On sale: Available to order now
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It Was Just an Accident
Director: Jafar Panahi
Stars: Vahid Mobasseri, Mariam Afshari, Ebrahim Azizi, Hadis Pakbaten, Majid Panahi, Mohamad Ali Elyasmehr
Rating: 4/5
More coverage from the Future Forum
The five pillars of Islam
1. Fasting
2. Prayer
3. Hajj
4. Shahada
5. Zakat
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Why are asylum seekers being housed in hotels?
The number of asylum applications in the UK has reached a new record high, driven by those illegally entering the country in small boats crossing the English Channel.
A total of 111,084 people applied for asylum in the UK in the year to June 2025, the highest number for any 12-month period since current records began in 2001.
Asylum seekers and their families can be housed in temporary accommodation while their claim is assessed.
The Home Office provides the accommodation, meaning asylum seekers cannot choose where they live.
When there is not enough housing, the Home Office can move people to hotels or large sites like former military bases.
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UAE currency: the story behind the money in your pockets
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%3Cul%3E%0A%3Cli%3EThe%20loss%20of%20sodium%20chloride%20in%20our%20sweat%20can%20lead%20to%20confusion%20and%20an%20altered%20mental%20status%20and%20slurred%20speech%3C%2Fli%3E%0A%3Cli%3EBody%20temperature%20above%2039%C2%B0C%3C%2Fli%3E%0A%3Cli%3EHot%2C%20dry%20and%20red%20or%20damp%20skin%20can%20indicate%20heatstroke%3C%2Fli%3E%0A%3Cli%3EA%20faster%20pulse%20than%20usual%3C%2Fli%3E%0A%3Cli%3EDizziness%2C%20nausea%20and%20headaches%20are%20also%20signs%20of%20overheating%3C%2Fli%3E%0A%3Cli%3EIn%20extreme%20cases%2C%20victims%20can%20lose%20consciousness%20and%20require%20immediate%20medical%20attention%3C%2Fli%3E%0A%3C%2Ful%3E%0A
The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
Specs
Engine: Duel electric motors
Power: 659hp
Torque: 1075Nm
On sale: Available for pre-order now
Price: On request
Banned items
Dubai Police has also issued a list of banned items at the ground on Sunday. These include:
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Political flags or banners
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Bikes, skateboards or scooters
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The burning issue
The internal combustion engine is facing a watershed moment – major manufacturer Volvo is to stop producing petroleum-powered vehicles by 2021 and countries in Europe, including the UK, have vowed to ban their sale before 2040. The National takes a look at the story of one of the most successful technologies of the last 100 years and how it has impacted life in the UAE.
Read part four: an affection for classic cars lives on
Read part three: the age of the electric vehicle begins
Read part one: how cars came to the UAE
THE BIO
Bio Box
Role Model: Sheikh Zayed, God bless his soul
Favorite book: Zayed Biography of the leader
Favorite quote: To be or not to be, that is the question, from William Shakespeare's Hamlet
Favorite food: seafood
Favorite place to travel: Lebanon
Favorite movie: Braveheart
Killing of Qassem Suleimani
Specs
Engine: 51.5kW electric motor
Range: 400km
Power: 134bhp
Torque: 175Nm
Price: From Dh98,800
Available: Now
KILLING OF QASSEM SULEIMANI
JERSEY INFO
Red Jersey
General Classification: worn daily, starting from Stage 2, by the leader of the General Classification by time.
Green Jersey
Points Classification: worn daily, starting from Stage 2, by the fastest sprinter, who has obtained the best positions in each stage and intermediate sprints.
White Jersey
Young Rider Classification: worn daily, starting from Stage 2, by the best young rider born after January 1, 1995 in the overall classification by time (U25).
Black Jersey
Intermediate Sprint Classification: worn daily, starting from Stage 2, by the rider who has gained the most Intermediate Sprint Points.
Specs
Engine: Dual-motor all-wheel-drive electric
Range: Up to 610km
Power: 905hp
Torque: 985Nm
Price: From Dh439,000
Available: Now
The five pillars of Islam
Pharaoh's curse
British aristocrat Lord Carnarvon, who funded the expedition to find the Tutankhamun tomb, died in a Cairo hotel four months after the crypt was opened.
He had been in poor health for many years after a car crash, and a mosquito bite made worse by a shaving cut led to blood poisoning and pneumonia.
Reports at the time said Lord Carnarvon suffered from “pain as the inflammation affected the nasal passages and eyes”.
Decades later, scientists contended he had died of aspergillosis after inhaling spores of the fungus aspergillus in the tomb, which can lie dormant for months. The fact several others who entered were also found dead withiin a short time led to the myth of the curse.
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