People hold Turkish flags and Turkish
President Recep Tayyip Erdogan's posters as they gather to protest failed
military coup attempt at Besyol Square in Van, Turkey on August 10, 2016.
Ratings agency Fitch affirmed its
sovereign rating on Turkey at
'BBB-', the lowest investment grade, on Friday but lowered its outlook to
negative from stable in a review after last month's attempted military coup.
Investors have been rattled by both the
failed July 15 putsch, when a group of rogue soldiers attempted to overthrow
the government, and the widespread crackdown that has followed, with the
arrests or dismissals of tens of thousands of people.
"An unsuccessful coup attempt in
July confirms heightened risks to political stability," the Fitch
statement said, saying a purge of some 70,000 public sector workers
"generates uncertainty over capacity and continuity."
"Political uncertainty is expected
to impact economic performance and poses risks to economic policy," it
added.
Both Fitch and Moody's rate Turkey at the
lowest investment-grade rung, allowing its bonds to be bought by more
conservative funds that require a country to be classed as investment grade by
at least two agencies.
Moody's said on July 18 it was putting Turkey's credit
rating on review for a possible downgrade to junk status.
Standard & Poor's cut its unsolicited
rating on Turkey further into junk territory last month and changed its outlook
to negative, also citing concerns following the coup.
In Friday's statement, Fitch said the
overwhelming public opposition to the coup attempt and subsequent unity of most
political parties could lessen political fractures.
But security conditions have worsened, it
said, referring to militant attacks which it said were having a material impact
on the tourism sector.
It did not expect the fiscal stance to
weaken in response to the coup attempt, though "the central bank and
commercial banks are facing renewed political pressure on interest rates,"
it said.
A downgrade could be triggered by
prolonged or deepened political instability, insecurity or geopolitical
stresses that undermine economic performance or economic policy credibility, it
added.
Source: CNBC