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Fitch Lowers Turkey's Sovereign Rating Outlook

Fitch Ratings downgraded the outlook on Turkey's sovereign ratings to Negative from Stable, citing various risks to macroeconomic and financial stability and potential external financing pressures.

The rating agency said the central bank's premature monetary policy easing cycle and the prospect of further rate cuts or additional economic stimulus ahead of the 2023 presidential election have led to a deterioration in domestic confidence, reflected in a sharp depreciation of the Turkish lira and rising inflation.

These developments create risks to macroeconomic and financial stability and could potentially re-ignite external financing pressures, Fitch noted.

Further, the agency viewed that the proximity of the 2023 electoral cycle will have an impact on policy direction and expectations of economic actors.

The sovereign ratings were affirmed at 'BB-'. The credit ratings reflect weak monetary policy credibility, high inflation, low external liquidity in the context of high financing requirements and geopolitical risks.

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