S&P raised Turkey’s credit rating

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Created Date: November 03, 2024 04:00

International credit rating agency Standard & Poor’s (S&P) increased Turkey’s credit rating. In the statement made by the credit rating agency, it was reported that Turkey’s long-term credit rating was increased from “B+” to “BB-” and the credit rating outlook was “stable”. It was also noted that the country’s short-term credit rating of “B” was confirmed.

In the statement, it was stated that the tight monetary policy stance of the Central Bank of the Republic of Turkey (CBRT) allowed Turkish authorities to stabilize the lira, reduce inflation, rebuild reserves and de-dollarize the financial system. In the statement, it was stated that Turkey’s savings gap with the rest of the world has narrowed, and this situation is seen in the approximately 4-point decrease in the ratio of the current account deficit to Gross Domestic Product (GDP) since 2022.

The outlook is stable, reflecting balanced risks over the next 12 months to the authorities’ ambitious plans to reduce still-high inflation, manage workers’ wage expectations and rebalance the Turkish economy, the statement said.

MINIMUM WAGE EMPHASIS

S&P’s statement stated that the rating could be upgraded if further progress is made in reducing inflation to single-digit levels and restoring long-term confidence in the Turkish lira and, more broadly, in local capital markets. In the statement, it was pointed out that indexing the increase rate in wage determination to the 2024 inflation rate, which is approximately 44 percent, instead of the government’s 2025 year-end inflation target of 17 percent, is a risk for the anti-inflation program. It was stated in the statement that it was assumed that the wage agreement would be determined between these two extreme points, but any increase rate higher than 30 percent would prolong the fight against inflation.

The statement stated that since there are no planned elections in the country until 2028, there may be room to suppress demand and inflation through gradual fiscal and income policy tightening.

It was stated in the statement that the slowdown in private consumption will play a central role in cooling the Turkish economy, and that real GDP growth is predicted to be 2.3 percent in 2025. S&P last increased Turkey’s credit rating from “B” to “B+” in May, while maintaining its credit rating outlook as “positive”.

‘WE ARE THE ONLY COUNTRY THAT HAS INCREASED BY TWO STAGES’

Minister of Treasury and Finance Mehmet Şimşek, in his post on his social media account, made an evaluation about the international credit rating agency Standard & Poor’s (S&P) increasing Turkey’s credit rating. Reminding that S&P increased Turkey’s credit rating from “B+” to “BB-“, Şimşek shared the information: “We are the only country whose rating was increased by two levels by the three major credit rating agencies this year.” Şimşek pointed out that the stabilization of the economy, decreasing current account deficit and external financing need, stability of the Turkish lira, strengthening reserves and the disinflation process were effective in the increase in the rating, and said: “These positive developments we achieved with our program also reduced our country risk premium and resulted in a significant improvement in our external borrowing costs.” has provided. Our market indicators implying a higher rating indicate that positive developments will continue in the coming period.”