By Ovunc Kutlu
NEW YORK (AA) – Global ratings agency Fitch Ratings downgraded Turkey's long-term foreign currency rating Friday to 'BB' from 'BB+' with a negative outlook.
Fitch said in a statement that it believes downside risks to macroeconomic stability have intensified due to a widening of the country’s current account deficit.
"In Fitch's opinion, economic policy credibility has deteriorated in recent months, and initial policy actions following elections in June have heightened uncertainty," it said.
The agency said it expects the current account deficit to widen to 6.1 percent of GDP in 2018 due to higher fuel prices and higher household consumption.
"The fall in the lira, combined with Fitch's forecast of lower oil prices and the ongoing tourism recovery, will cause the deficit to narrow to 4.1 percent in 2019," the statement said.
Fitch said Turkey's large gross external financing requirement leaves it vulnerable to shocks.
The agency, however, said healthy external demand, a continued recovery in tourism, infrastructure spending and employment growth would support the economy.
The economy is forecast to grow by 4.5 percent in 2018 and 3.6 percent in 2019, according to Fitch.
"Turkey is a large and diversified economy with a vibrant private sector," the ratings agency said.