B+ credit rating reflects confidence in Türkiye’s current outlook, says Fitch analyst

Fitch Ratings currently upholds Türkiye’s credit rating at ‘B+,’ expressing heightened confidence in the ongoing durability of the economic policy pivot

The renowned senior director in Fitch Ratings’ sovereigns group, a primary Türkiye analyst, Erich Arispe Morales, highlighted the positive shift as the credit rating elevated from ‘B’ to ‘B+,’ accompanied by an upgraded outlook from stable to positive.

Morales emphasized the positive outcomes of this pivotal change, stating: “It reflected our assessment that the policy pivot was consistent with reducing the risk of macroeconomic and financial instability. Since then, we have greater confidence that the current policy pivot is more durable and has led to a more optimistic economic outlook.”

The analyst elaborated on the broader impact, noting, “The market has opened not only for the sovereign but also we saw that banks and corporates also accessing external financing after the policy pivot.”

Success in easing inflation expectations

Commenting on the effectiveness of economic policies, Morales highlighted their success in easing inflation expectations and gradually reducing inflation.

Morales has projected a positive trend for Türkiye’s economic future. He expects the country’s current account deficit to continue to reduce, reaching around 2.6% of GDP in 2024 and 2.2% of Gross Domestic Product (GDP) in 2025. These figures are below the projected medians for countries with similar ratings, indicating a potential for economic growth and stability.

Morales also pointed out two pivotal developments in FX-protected deposits, emphasizing a decline from $130 billion to $74 billion and noting that this reduction did not lead to a substantial increase in financial dollarization.”

“Moving on six months from our September review, we can say that we have greater confidence that the policy shift will be sustained,” Morales asserted.

“It seems that the assessment of both the credibility, durability and consistency of the policy framework has played and will continue to play an important role in investor expectations for the country,” he concluded on a forward-looking note.

Source: Newsroom