S&P highlights erosion of checks and balances in Turkey

International ratings agency Standard & Poor’s on Friday said the continued erosion of institutional checks and balances poses risks to business confidence and economic stability — yet another warning from a global institution regarding the current political uncertainty in the country.
The agency’s statement highlighting the weakened state of Turkey’s independent institutions came on the heels of a decision by the country’s central bank to cut key interest rates amid pressure from Prime Minister Recep Tayyip Erdoğan. On Thursday, the central bank surprised markets with its first rate cut in a year, weeks after Erdoğan called for rates to fall — reviving questions about political pressure on the bank. “In our view, the authorities have not used fiscal and monetary policy settings consistently enough to build up buffers against potential external risks,” the agency said in Friday’s statement. It added that “limited policy buffers have also partly stemmed from an erosion of institutional checks and balances.”
The agency released its outlook report on Turkey on Friday. The agency kept its outlook for the country steady at negative, reflecting S&P’s opinion that risks to Turkey’s economy persist. The agency also affirmed its “BB+/B” long- and short-term foreign currency sovereign credit ratings.
“A crowded electoral calendar and an uncertain external environment make many of our forecasts highly contingent on investor confidence in the policymaking framework,” the agency said. In a clear warning, S&P said it may downgrade Turkey’s credit rating if there is an unprecedented deterioration in the balance of payments or a decline in economic growth.
“The negative outlook reflects our view of at least a one-in-three likelihood that we could downgrade Turkey within the next 12 months if there is a balance-of-payments or growth shock,” the agency said. The agency went on to explain what such a shock could mean for Turkey: “A severe shock could affect fiscal performance as well as financial sector stability. The latter could potentially lead to contingent liabilities crystallizing on the sovereign balance sheet as the financial sector contends with exchange-rate volatility and weaker growth.”
Standard & Poor’s also pointed to other problems in the Turkish economy: “We believe Turkey’s policy environment has become less predictable, and that this could weigh on the economy’s resilience to external shocks and hamper its long-term growth. The current account deficit is high, in our view, despite signs of some narrowing due to an improvement in export performance.”
The S&P said that “the downward pressure on the ratings could abate if fiscal and monetary policies supported more-balanced economic growth, which in turn depended less heavily on external borrowing.”


About yavuzbaydar

Yavuz Baydar has been an award-winning Turkish journalist, whose professional activity spans nearly four decades. In December 2013, Baydar co-founded the independent media platform, P24, Punto24, to monitor the media sector of Turkey, as well as organizing surveys, and training workshops. Baydar wrote opinion columns, in Turkish, liberal daily Ozgur Dusunce and news site Haberdar, and in English, daily Today's Zaman, on domestic and foreign policy issues related to Turkey, and media matters, until all had to cease publications due to growing political oppression. Currently, he writes regular chronicles for Die Süddeutsche Zeitung, and opinion columns for the Arab Weekly, as well as analysis for Index on Censorship. Baydar blogs with the Huffington Post, sharing his his analysis and views on Turkish politics, the Middle East, Balkans, Europe, U.S-Turkish relations, human rights, free speech, press freedom, history, etc. His opinion articles appeared at the New York Times, the Guardian, El Pais, Svenska Dagbladet, and Al Jazeera English online. Turkey’s first news ombudsman, beginning at Milliyet daily in 1999, Baydar worked in the same role as reader representative until 2014. His work included reader complaints with content, and commentary on media ethics. Working in a tough professional climate had its costs: he was twice forced to leave his job, after his self-critical columns on journalistic flaws and fabricated news stories. Baydar worked as producer and news presenter in Swedish Radio &TV Corp. (SR) Stockholm, Sweden between 1979-1991; as correspondent for Scandinavia and Baltics for Turkish daily Cumhuriyet between 1980-1992, and the BBC World Service, in early 1990's. Returning to Turkey in 1994, he worked as reporter and ediytor for various outlets in print, as well as hosting debate porogrammes in public and private TV channels. Baydar studied informatics, cybernetics and, later, had his journalism ediucatiob in the University of Stockholm. Baydar served as president of the U.S. based International Organizaton of News Ombudsmen (ONO) in 2003. He was a Knight-Wallace Fellow at University of Michigan in 2004. Baydar was given the Special Award of the European Press Prize (EPP), for 'excellence in journalism', along with the Guardian and Der Spiegel in 2014. He won the Umbria Journalism Award in March 2014 and Caravella/Mare Nostrum Prize in 2015; both in Italy. Baydar completed an extensive research on self-censorship, corruption in media, and growing threats over journalism in Turkey as a Shorenstein Fellow at the Kennedy School of Government at Harvard.
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