WASHINGTON: Fitch Ratings on Friday downgraded Turkey’s debt from BB- to B+ with a negative outlook, citing high inflation and a lack of confidence in policymakers to turn the tide.

The downgrade comes after data released earlier in the month showed inflation hitting a two-decade record of nearly 50 per cent in January, though some economists estimate it is much higher than that.

“Policy-driven financial stress episodes of higher frequency and intensity have increased Turkey’s vulnerabilities in terms of high inflation, low external liquidity and weak policy credibility,” Fitch said in announcing its decision.

The agency added that it “does not expect the authorities’ policy response” to “sustainably ease macroeconomic and financial stability risks.”

Although inflation is rising across the world, thanks in part to easy money policies adopted to cushion the blow of the Covid-19 pandemic, Turkey’s problems are dramatically more acute because of President Recep Tayyip Erdogan’s unorthodox economic approach.Erdogan rejects the idea that inflation should be fought by hiking the main interest rate, which he believes causes prices to grow even higher, the exact opposition of conventional economic thinking.

The price spike complicates the president’s path to re-election in 2023, and Fitch warned there was a “high” risk of “additional destabilizing monetary policy easing or stimulus policies” ahead of the polls.