S&P holds steady Turkey's credit rating

By Ovunc Kutlu

NEW YORK (AA) - The Standard & Poor's (S&P) ratings agency kept Turkey's credit rating unchanged Friday, but lowered its outlook to "negative" from "stable".

Turkey's foreign currency credit rating was held steady at "BB", while its local currency credit rating was also preserved at "BB+".

The response of the central bank to increasing currency and inflationary pressures in Turkey "may prove insufficient”, the agency said in a statement.

Such inflationary and currency pressures could weaken the financial strength of Turkish companies and banks, and undermine economic growth, the agency warned.

"The Turkish lira has depreciated by 18 percent against the U.S. dollar and 15 percent against the euro," since its last review of Turkey's rating in November, S&P said, and estimated 2 percent economic growth in 2016, however, it lowered its growth forecast for 2017 to 2.4 percent from 3.2 percent.

S&P warned that Turkey's foreign exchange reserves that are estimated around $35 billion, can give only “limited” economic protection against external pressures, since it "provide[s] coverage for about two months of current account payments".

The agency said domestic banks remain "well regulated and amply capitalized", but warned if assets deteriorate and economic growth becomes weaker than anticipated, S&P would lower Turkey’s credit ratings.

The lira remained largely unchanged against the dollar following the announcement,