Experts Evaluate S&P’s Credit Decision on Turkiye

Timothy Ash, Senior Strategist for Emerging Markets at Bluebay Asset Management, stated in an assessment to AA correspondent that considering the policy adjustments led by Treasury and Finance Minister Mehmet Şimşek and his team, this was a deserved development. He remarked, “Turkey has overcome the economic challenges.”

S&P Upgrades Turkey’s Credit Rating
AA Finance analyst and economist Haluk Bürümcekçi pointed out that S&P’s decision, which turned the outlook to positive in the review in December and given Turkey’s current 5-year credit default swap (CDS) rate, was an expected development.

In this regard, Bürümcekçi forecasted that Moody’s might also increase its rating by at least one notch, as seen in its evaluation on July 19th. He said, “Among the countries rated at the ‘B+’ level by S&P and Fitch, Bahrain and Jordan are included. These countries have CDS rates of 250 basis points or below. Therefore, it can be expected that the downward trend in Turkey’s risk premium, which is around 290, will continue.”

Prof. Dr. Erhan Aslanoğlu, Vice Rector of Istanbul Topkapı University, also mentioned that S&P upgraded Turkey’s credit rating from “B” to “B+” in line with expectations.

While Aslanoğlu expressed that this was certainly a positive development, he conveyed that Turkey’s strong improvement in CDS and other risk indicators resulted from the formation of a more predictable policy framework, especially the strengthening trend of monetary policy beyond expectations.

  • “It is important for fiscal policy to strongly accompany monetary policy”

Aslanoğlu stated that in the future, as frequently emphasized both domestically and internationally, it seems important for fiscal policy to strongly accompany monetary policy and for a sustainable path to be pursued for the improvement to continue.

Aslanoğlu noted that this aspect was emphasized in S&P’s evaluation, and another noteworthy point was the expectation regarding income policy.

He provided the following assessment:

“This expectation, I believe, emphasizes the importance of inflation forecasts in prices guided and managed by the public being in line, as well as the existence of societal consensus on wage and price adjustments. In high inflation environments, such societal consensus and income policy implementation can be crucial for success. If a permanent decrease in inflation can be achieved in the future, a reduction in the current account deficit, and the formation of a sustainable path, credit rating upgrades will likely continue.”

The international credit rating agency S&P upgraded Turkey’s credit rating from “B” to “B+” while maintaining a “positive” outlook.

Moody’s also raised Turkey’s credit rating outlook from “stable” to “positive” in January.

Fitch Ratings, on the other hand, raised Turkey’s credit rating from “B” to “B+” in March while changing the outlook from “stable” to “positive.”

source: prepared by Melisa Beğiç

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