Moody's downgrades Turkey outlook to 'negative'

Moody's rating agency on Thursday downgraded its outlook on Turkeyto "negative", putting the country's investment-grade rating at risk, saying politicaluncertainty was affecting investor confidence and casting doubt over furtherreforms.The agency re-affirmed the country's current bond rating of Baa3, just one stepabove a so-called 'junk' level, which is out of bounds for many pension and savingsfunds seeking safer investments. The move piles more pressure on Prime Minister Recep Tayyip Erdogan, who hasmade a turnaround in Turkey's economic fortunes a keystone of his 11-year rule.Turkey's strongman has faced increasing pressure for nearly a year, after hugedemonstrations against his rule, which critics say has grown increasinglyauthoritarian, erupted in the country in June 2013, sparked by re-development plansfor a green space in Istanbul.Months later, the government found itself embroiled in a major graft probetargeting the prime minister's inner circle.The turmoil put pressure on the national currency, with the lira losing over 10percent in two months before the central bank hiked interest rates in late January tostem the pressure.Nevertheless, Erdogan emerged triumphant in March 30 local polls, with his rulingIslamic-rooted Justice and Development Party (AKP) sweeping the election.Turkey's economy grew by 4.0 percent in 2013, but analysts warn of a slowdownafter months of turmoil and ahead of presidential elections in August.Moody's said that despite Erdogan's election triumph, political tensions will persist through the second quarter of 2015 when parliamentary polls are due, and willweaken the country's external financing position and medium-term growthprospects.The combination of challenges facing the country today -- heightened politicalturbulence, pressures on its external financing and the prospect of weaker growth inthe medium term, shift the balance of credit risks to the downside," it said.The agency said it expected Turkey's economic growth to slow to 2.5 percent in 2014and 3.0 percent in 2015.Fitch Ratings affirmed on April 4 its BBB- rating for Turkey, also the lowestinvestment-grade rating, but with a stable outlook.Standard & Poor's in February switched the outlook its rating of BB+ for Turkey, thehighest speculative-grade, to negative citing a risk of a hard landing for thecountry's economy.