S&P changes Turkey's outlook to 'negative'

A Turkish flag with the Bosphorus Bridge in the background flies on a passenger ferry in Istanbul
A Turkish flag with the Bosphorus Bridge in the background, flies on a passenger ferry in Istanbul, Turkey September 30, 2020. REUTERS/Murad Sezer

March 31 (Reuters) - S&P Global Ratings revised its outlook for Turkey to "negative" from "stable" on Friday, citing vulnerabilities from the country's low policy rates, directed lending and regulatory control on its foreign currency positions and interest rates.

Turkey continues to grapple with soaring prices of goods and services. And a devastating earthquake that hit the country earlier in February is expected to keep inflation elevated in the run-up to the presidential and parliamentary elections on May 14.

Turkey's central bank, on Feb. 23, cut its main interest rate to 8.5% to cushion the impact of the earthquake on its economy.

"Given Turkey's elevated current account deficits, limited usable reserves, high inflation and reliance on occasional capital inflows, the outlook for the exchange rate remains, at best, uncertain," S&P said in a statement.

The ratings agency maintained the country's sovereign credit rating at 'B'.

Reporting by Saikeerthi in Bengaluru, Darren Butler in Ankara; Editing by Shilpi Majumdar

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