S&P downgrades Turkey's long-term debt from 'BB+' to 'B-'

Standard&Poor's downgraded the rating on Turkey's long-term sovereign debt on Friday on the back of the "extreme" volatility in the value of its currency over the past two weeks, which was expected to result in an economic recession in 2019 even as it leads to a "considerable increase" in funding risks for the country's lenders.

As it downgraded the rating from 'BB-' to 'B+', S&P added that the response thus far from policymakers had been "limited".

"The downgrade reflects our expectation that the extreme volatility of the Turkish lira and the resulting projected sharp balance of payments adjustment will undermine Turkey's economy," S&P said.

"The weakening of the lira is putting pressure on the indebted corporate sector and has considerably increased the funding risk for Turkey's banks," S&P said.

Nevertheless, the so-called outlook on the country's debt was kept at 'stable', with the agency describing the country's debt pile, as a proportion of gross domestic product, as "still-moderate".

Consumer price inflation was now seen peaking at 22% over the next four months, before slipping below 20% towards the middle of 2019.

The year-on-year rate of gain in Turkey's CPI stood at 15.85% in July.