The head of the Turkish government’s economic team, Deputy Prime Minister Mehmet Simsek, on May 2 hit out at the surprise pre-election timing of S&P Global Ratings’ announcement the previous day that it was cutting Turkey’s credit rating further into junk.

The announcement was not part of S&P’s regular schedule and came amid the runup to the snap parliamentary and presidential elections due on June 24. The rating agency said it was responding to the growing risk of Turkey’s overheating economy experiencing a hard landing.

The downgrade from S&P, combined with news that the results of the upcoming elections have become less predictable because four opposition parties are to create a formal alliance to battle the ruling AKP party and President Recep Tayyip Erdogan, appeared to hit Turkey’s financial markets. During late trading on May 2 the already embattled Turkish lira (TRY) on May 2 weakened to as low as 4.1810 against the dollar, not far short of the all-time low of 4.1944 recorded on April 11. It had started the day at 4.1061.

Simsek asked in a tweet on his official Twitter account: "Is there any development that required them [S&P] moving to an earlier date [from the scheduled August 2018 review date]?"

In further tweets, he said S&P's analysis was "insufficient", claiming that Turkey's overheating was last year's story, given that there had since been a slowing down of the increase in credit volume in the economy.

"Financial conditions are tighter compared to 2017. Turkish Central Bank reacted even if it was a delayed [reaction]," he wrote, referring to the 75-basis point interest rate hike delivered by the regulator on April 25.

S&P’s ratings on Turkey are unsolicited because the Turkish government withdrew from its ratings service agreement with the agency in 2014 after accusing it of putting forward a negatively biased view. It is known as the most bearish of the international rating agencies when it comes to assessing the country. No access to internal documents is given to S&P for its rating work on Turkey. Moody’s and Fitch rate Turkey one or two notches higher than their rival.

In response to the S&P downgrade, Raiffeisen Zentralbank (RZB) said it saw no immediate need to downgrade Turkey’s Eurobonds, but added: “Nevertheless this may have to go under revision if the current situation on the TRY market continues to deteriorate.”

“Temporary” gold, oil factors
Turning to the surging current account deficit that has unsettled investors, Simsek in additional tweets said the trend was "most likely" temporary as it was mainly driven by gold imports and higher oil prices. He added: "Deceleration in consumer loans will limit the rise in the gap."

Simsek also said that a tourism industry recovery was under way in Turkey, and stated that the government would “accelerate reforms after the elections".

He noted that economic uncertainty would be reduced thanks to a central bank decision to simplify its monetary policy. It is to bring in one policy interest rate to replace the current four rates that it uses, for instance.

Simsek, a former Merrill Lynch and UBS banker, is viewed as an important voice of economic orthodoxy in Turkey’s government and a possible moderating influence on populist President Recep Tayyip Erdogan who tends to demand monetary loosening to drive investment even when the markets are crying out for tightening. Some analysts see Simsek as the last market-friendly member of the cabinet and on April 5 rumours that he had resigned were enough in themselves to give the TRY another torrid day.