Moody’s holds Türkiye’s credit rating at ‘B1’, praising disinflation progress

One of the big three credit rating agencies, U.S-based Moody’s announced on Friday that it maintained Türkiye’s long-term issuer rating at “B1” with a positive outlook.

Moody’s report commended Türkiye’s resilient and diversified economy, which has shown signs of stabilization following recent policy shifts. Annual inflation, which peaked at 75.4% last May, declined significantly to 44.4% by December. Moody forecasted inflation to drop to 30% by the end of 2025 as disinflationary measures take effect.

According to the report, the tightened monetary policy, a cornerstone of recent reforms, has been credited with curbing domestic credit growth and bolstering confidence in the Turkish lira.

The measures have also contributed to reducing inflationary pressures and narrowing the current account deficit. The deficit shrank to 0.7% of gross domestic product (GDP) in the 12 months to September 2024, down from 3.6% in 2023, aided by reduced imports of gold, lower energy prices and strong tourism revenues.

Reforms key to Türkiye’s credit rating upgrade

Moody’s highlighted the importance of Türkiye’s return to more orthodox economic policies but warned that sustaining improvements requires consistent reforms. Institutional concerns, including the concentration of executive power and potential risks of policy reversals, continue to weigh on Türkiye’s credit profile.

The positive outlook suggests that Türkiye could achieve an upgrade if inflation is reduced sustainably, economic rebalancing efforts are maintained, and structural reforms bolster institutional effectiveness.

Moody’s also underlined the importance of reducing external vulnerabilities, such as reliance on energy imports and sensitivity to currency fluctuations. The agency cautioned, however, that any reversal to credit-driven growth policies or stalled progress on disinflation could undermine recent gains and lead to a stable outlook.

Moody’s last upgraded Türkiye’s credit rating by two notches from “B3” to “B1” on July 19, 2024, while maintaining a “positive” outlook. Alongside Moody’s, the other two major credit rating agencies, Fitch Ratings and S&P Global, also upgraded Türkiye’s credit rating in 2024, making it the only country to receive upgrades from all the big three credit rating agencies that year.

According to Türkiye’s Treasury and Finance Ministry, the credit ratings assigned to the Turkish economy by the big three credit rating agencies are as follows:

Rating agencies	Türkiye sovereign credit rating	Outlook
Fitch	BB-	Stable
Moody’s	B1	Positive
S&P	BB-	Stable