S&P: Rising risk of more capital controls in Turkey

There is a rising risk that Turkey brings in additional capital controls if the pressure on its currency and financial markets continues to intensify, credit rating firm S&P Global said on Wednesday.

Turkey’s lira has slumped 22% this year, raising concerns that the country could be heading for a repeat of the FX crisis seen at the end of last year.

One of S&P’s top sovereign analysts, Maxim Rybnikov, said in an online presentation that S&P’s move in April to cut Turkey’s local currency rating had also reflected the concerns of additional capital controls.

“This is not the baseline still, but I think the risk is increasing,” Rybnikov said.

Another of S&P’s analysts added that the falling lira meant that asset quality problems would eventually “pop up” in Turkey’s banking sector, while the pace of the recovery in tourism had been one of the few positive surprises. [Reuters]