The Daily Update - Turkey

After the failed coup attempt last weekend, yesterday S and P downgraded Turkey’s sovereign credit rating from BB+ to BB adding that the outlook has also became negative. In a statement after the downgrade the rating agency said, "Following the attempted coup in the Republic of Turkey on July 15, we believe the polarisation of Turkey's political landscape has further eroded its institutional checks and balances" adding that there would be “a period of heightened unpredictability that could constrain capital inflows into Turkey’s externally leveraged economy”.

According to S and P, Turkey has approximately USD170bln of external debt that it must roll over in the next 12 months. With this in mind they went on to say, "The negative outlook reflects our view that Turkey's economic, fiscal, and debt metrics could deteriorate beyond what we expect, if political uncertainty contributed to further weakening in the investment environment, potentially intensifying balance-of-payment pressures".

Along with the downgrade yesterday, Turkeys President Erdogan announced a 3-month state of emergency. The state of emergency is seen as a milder category than that of martial law. During a state of emergency, rights of freedom can be curtailed and a Council of Ministers may issue decrees having the force of law, however given what happened over the weekend the declaration of a three-month period of state of emergency does not seem to be an excessive measure – it is neither as severe as declaring martial law, nor was it announced for the maximum possible term of six months.

All this comes as the Turkish government continues its clampdown on suspected sympathisers of Friday's coup. So far, according to Turkish media reports, 15,200 teachers have been fired along with nearly 1,600 university deans, over 10,200 interior and finance workers have also lost their jobs. Even within the Prime Minister’s office nearly 260 people have gone. These sackings come after 20,000 police officers, military personnel and judges have either been fired, suspended or arrested.