July 12, 2019 / 9:14 PM / 7 days ago

UPDATE 1-Fitch downgrades Turkey after dismissal of central bank governor

(Adds comment by Fitch, background)

ISTANBUL, July 12 (Reuters) - Ratings agency Fitch downgraded Turkey’s sovereign rating to “BB-“ on Friday, saying the dismissal of its central bank governor heightens doubts over the authorities’ tolerance for a period of sustained below-trend growth.

Governor Murat Cetinkaya was sacked on July 6 and President Tayyip Erdogan said on Wednesday he had dismissed him because Cetinkaya failed to follow instructions on interest rates and the bank had not properly fulfilled its role.

Fitch, which lowered Turkey’s rating from “BB” with a negative outlook, said Cetinkaya’s removal also highlights a deterioration in institutional independence and economic policy coherence and credibility.

It said the move “risks damaging already weak domestic confidence (evidenced by rising dollarisation), jeopardising the inflow of foreign capital needed to meet Turkey’s large external financing requirement and worsening economic outcomes.”

Fitch said the dismissal also added to uncertainties over the prospects for structural reforms and management of the public sector finances. (Reporting by Daren Butler in Istanbul Editing by Richard Chang and Matthew Lewis)

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