Standard & Poor’s (S&P) has upgraded Türkiye’s long-term sovereign credit rating from B+ to BB- with a stable outlook, marking a significant endorsement of the country’s economic policies. This upgrade reflects the effectiveness of Türkiye’s monetary policy and its efforts to stabilize the economy amidst ongoing challenges.
Key Takeaways
- Türkiye’s credit rating upgraded from B+ to BB- by S&P.
- The stable outlook indicates balanced risks in the coming year.
- Central Bank’s tight monetary policy credited for stabilizing the lira and reducing inflation.
- The current account deficit has decreased significantly since 2022.
- Future upgrades possible if inflation trends towards single digits.
Economic Context
The upgrade comes as Türkiye’s Central Bank has implemented a tight monetary stance, which has been pivotal in stabilizing the Turkish lira and reducing inflation rates. The agency noted that Türkiye’s annual inflation rate fell to 49.38% in September, a significant drop that reflects the effectiveness of the current economic policies.
S&P’s decision is particularly noteworthy as it is the second upgrade for Türkiye this year, following similar actions by other major credit rating agencies like Fitch and Moody’s. This trend indicates a growing confidence in Türkiye’s economic recovery and fiscal management.
Implications of the Upgrade
Treasury and Finance Minister Mehmet Şimşek welcomed the upgrade, emphasizing that it highlights Türkiye’s unique achievement of receiving two-notch upgrades from three major credit rating agencies within the same year. He stated that the positive developments in the economy have lowered Türkiye’s risk premium and improved external borrowing costs.
The upgrade is expected to boost investor confidence in Türkiye’s financial markets, potentially leading to increased foreign investment and improved economic conditions.
Future Outlook
S&P has projected a slight easing of real GDP growth to 2.3% in 2025, down from 3.1% in 2024. However, the agency anticipates a gradual economic recovery beginning in 2026, driven by stronger exports and continued improvements in domestic economic conditions.
The stable outlook reflects S&P’s expectation that the current economic team will maintain a tight monetary policy, which is crucial for managing inflation and rebalancing the economy. The agency has warned that any intensification of pressures on Türkiye’s financial stability could lead to a downgrade, while further progress in reducing inflation could result in additional upgrades.
Conclusion
The upgrade of Türkiye’s credit rating by S&P is a significant milestone for the country, reflecting the positive impact of its economic policies and the effectiveness of its monetary strategy. As Türkiye continues to navigate its economic challenges, the focus will remain on sustaining this momentum and achieving long-term stability in its financial markets.
Sources
- Standard & Poor’s raises Türkiye’s rating to BB- from B+ with stable outlook, Anadolu Ajansı.
- S&P raises Türkiye’s rating to BB- with stable outlook – Latest News, Hürriyet Daily News.
- S&P upgrades Turkey’s ratings to ‘BB-‘ in second raise this year | Reuters, Reuters.
- S&P upgrades Turkey’s ratings by a notch to ‘BB-‘; outlook ‘stable’ | Reuters, Reuters.
