‘Political tensions in Türkiye may threaten economic confidence’: S&P Global

Recent political developments in Türkiye could pose risks to economic confidence and exchange rate stability, one of the big three credit rating agencies, U.S.-based S&P Global, expressed concern in its latest assessment released on Monday.

The agency’s comments follow the arrest of Istanbul Mayor Ekrem Imamoglu on Sunday, along with the subsequent arrest of several other municipal officials.

S&P highlighted that, since the end of 2023, Turkish authorities have made significant progress in encouraging households to convert their savings from gold and foreign currencies back into Turkish lira.

This shift, according to the agency, contributed to the country’s improved foreign exchange reserves and helped reduce inflation — developments that had previously supported S&P’s credit rating outlook for Türkiye, which currently stands at BB- with a stable outlook and a short-term rating of B.

‘Rising uncertainty could drive inflation up’

However, the report warned that recent political uncertainty could potentially reverse the economic gains achieved so far, indicating that renewed tensions might undermine the ongoing reform process.

S&P also drew attention to recent emergency measures implemented by the Central Bank of the Republic of Türkiye (CBRT), such as direct foreign exchange interventions, changes in liquidity operations, and a sharp increase in overnight lending rates, noting that the rising uncertainty could have significant secondary effects on household consumption, capital inflows, the exchange rate, economic growth, and inflation.

These pressures could interrupt the recent decline in deposit dollarization and inflation, S&P added.