Moody's affirms Turkey's rating at 'B2', maintains outlook

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Business and residential buildings are seen in Sisli district as the outbreak of the coronavirus disease (COVID-19) continues, in Istanbul, Turkey September 7, 2020. REUTERS/Murad Sezer

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Dec 3 (Reuters) - Ratings agency Moody's on Friday affirmed Turkey's rating at "B2", saying that irrespective of the current pressure on its currency, the country's external vulnerability risk has declined.

Moody's said it expects Turkey's public finances to remain relatively robust, with public debt staying at around 40% of GDP in 2022, adding that the country's diversified private sector shows relative resilience to currency volatility.

However, data on Friday showed Turkey's annual inflation jumped more than expected to a three-year high of 21.31% in November, further exposing the risks of recent aggressive rate cuts that prompted a historic slide in the lira. read more

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The ratings agency maintained Turkey's outlook at "negative", citing unpredictable policymaking.

"The current economic policy stance will lead to significantly higher inflation over the coming months, eroding households' purchasing power and increasing the likelihood of a sharp slowdown in growth despite lower interest rates," Moody's said.

Fitch on Thursday had revised the country's outlook to "negative" from "stable" over risks from monetary policy easing. read more

The country risks damaging confidence in the lira further by using "borrowed" reserves to defend its exchange rate and recent developments put its current sovereign debt credit rating at risk, S&P Global Ratings said on Thursday. read more

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Reporting by Ahmed Farhatha; Editing by Amy Caren Daniel

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