Türkiye’s Moody’s rating could go up 2 levels at once: BBVA strategist

U.S.-based credit rating agency Moody’s may increase Türkiye’s credit rating by two levels in July as the country puts a positive spin on its economic outlook, according to Spanish multinational financial services company BBVA’s MENA and Türkiye strategist Tufan Comert.

“(Türkiye’s Moody’s rating) is six levels below the investment grade,” Comert told CNBC-e as he noted that a two-level increase would not dramatically alter things but would improve morale.

Comert emphasized that the markets love a comeback story. “Türkiye, Egypt and Nigeria are three countries with comeback stories,” he said. “Türkiye’s comeback story has suffered a few setbacks with elections and inflation this year.”

Comert predicted that inflation would drop 10 to 15 percentage points in the summer, decreasing to 40% by the end of the year. However, according to Comert, the real question is what to do after inflation drops to 40%.

“This year’s interest rate cut depends on the decline in inflation,” Comert stated.

Comert also drew attention to some minor dilemmas on the foreign investor front. “Foreigners still have the fear of ‘Will we return to the policies of the last 5 years?’ However, there is also a positive perception of ‘Wait a minute, what is happening in Türkiye?’,” he explained.

“When you think of foreigners, you think of London, but the real money is in the Gulf. The real question is whether current policies are sustainable. Foreigners no longer have any question marks regarding monetary policy. A savings package has been announced, but more serious measures are expected. The budget is going well, if savings come into play, budget discipline will come to the fore.”

In a recent statement, Comert expressed his belief that opening a London swap channel this year is unnecessary for Türkiye. He noted that the country is already attracting funds through its current efforts and questioned the potential use of money received from such swaps by the banks.

According to Comert, foreign investors would not be interested in a one-year swap in Türkiye as most of them come to Türkiye because of TLref, or the Turkish lira overnight reference rate, meaning that “foreigners are coming to Türkiye, but they are for the high interest rates.”

Comert emphasized that the situation in Europe holds greater significance for Türkiye than the decisions made by the United States Federal Reserve.