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Fitch cuts Turkey’s outlook to stable from positive

ANKARA - Fitch Ratings cut Turkey’s foreign currency and local currency credit rating outlook to stable from positive on Thursday, citing increased political risks.

The ratings were affirmed at ’BB-’, three notches below investment grade and comparable to the ’BB-’ rating of Standard & Poor’s and ’Ba3’ rating of Moody’s Investors Service.

“Although Turkey’s current prudent fiscal policy stance, impressive growth performance and strong FDI inflows are consistent with improving macroeconomic fundamentals, negative political shocks have raised event risk and clouded the credit outlook,” Edward Parker, head of Fitch’s sovereign ratings, said in a statement.

The Turkish lira weakened slightly against the U.S. dollar, moving to a 1.3420 from around 1.3360 TRY.

Moody’s said on Wednesday it did not expect Turkey’s political crisis to derail the European Union candidate’s ’Ba3’ rating, saying its “impressive” economic turnaround in recent years left it capable of absorbing political volatility.

Turkey has called early parliamentary elections for July 22, three months ahead of schedule, after the government’s candidate for president, Foreign Minister Abdullah Gul, was blocked by opposition lawmakers.

Opposition parties boycotted the parliamentary vote on the president and the constitutional court then ruled it invalid.

A terse warning from the military has made clear it is watching events closely and is ready to intervene if it believes the secular state is in danger.