S&P Names Turkey Among ‘Fragile Five’ Due to Increasing Interest Rates

Story Highlights

  • Turkish economy is more vulnerable now
  • Increasing interest rates have added new volatility to emerging markets.

Credit rating agency S&P Global has named Turkey among the five countries, which are most negatively affected by rising interest rates.

Turkey, Argentina, Pakistan, Egypt, and Qatar have been listed as the new “fragile five.” These emerging market economies would be exposed to reverberations from developed countries’ monetary policies, a report by S&P suggests.

Since 2008 financial crisis, central banks across the advanced economies and around the world had employed ultra-loose money policies. But it started to change as central banks began to raise benchmark rates in some cases.

It is set to affect the emerging markets, which are fragile due to increasing interest rates.

Monetary conditions are “exceptionally accommodative and, for some emerging markets, “the finding environment is now the most benign in living memory,” Moritz Kraemer, S&P Global’s managing director and sovereign global chief rating officer said in a report on Monday, according to CNBC News.

He said: “Yet the threat from monetary tightening is now more concrete than before.”

“In these five countries, large current account deficits show insufficient savings rates to cover national investments,” the report said, addressing the emerging woes that are gripping those fragile economies.

The announcement, however, drew ire of the Turkish government. President Recep Tayyip Erdogan’s Chief Advisor Bulent Gedikli dismissed S&P report as “nonsense” and presented it as an attempt to portray the Turkish economy as weak and vulnerable.

“Those countries, which shape views about global markets through manufactured numbers or digital positiveness are known well,” Mr. Gedikli said.

“Let us give our response to credit rating agency S&P whose forecasts are proven to be wrong and whose ability for analysis is very weak.”

“Inflation and mobility in rates are signs of the vitality of the economy. Look, some countries are never able to produce inflation. Because there is no economic vitality,” he added, offering a counter-argument to negate the report’s bleak assessment.

He said Turkey expects a fall in high inflation from this December on.

“Do not make trouble by immediate speculation.”

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