While Fitch Ratings confirmed Turkiye’s credit rating as “B”, it increased the rating outlook from “negative” to “stable” after 2 years.
Fitch Ratings revised Turkiye’s credit outlook.
In the statement made by the institution, it was reported that Turkiye’s long-term foreign currency credit rating was confirmed as “B” and the credit rating outlook was changed from “negative” to “stable”.
The statement emphasized that the revision of the outlook to “stable” reflects a return to a more traditional and coherent policy mix that reduces short-term macrofinancial stability risks and alleviates balance of payments pressures.
In the statement, it is reminded that the Central Bank of the Republic of Turkiye (CBRT) has increased the policy rate by 1650 basis points to 25% since June. It was claimed that the Bank is estimated to increase the policy rate to 35% by the end of 2023 and to keep it at this level in 2024, and that there is a high level of uncertainty about the future pace and duration of monetary policy tightening.
In the statement, it was noted that gross international reserves have recovered noticeably since mid-May, and it is estimated that reserves will reach $115 billion by the end of 2023 and remain relatively stable in 2024.
In the statement, which also includes inflation forecasts, it was stated that the average inflation rate is 51.9% and the year-end inflation will be 65% in 2023.
Fitch forecasts growth to reach 4.3% in 2023
In the Fitch Ratings statement, it was noted that economic growth is expected to reach 4.3% in 2023 and 3% in 2024.
In the statement, it was stated that Turkiye took rapid action to improve relations with NATO allies after the elections, signaled its intention to revive the negotiation process for updating the Customs Union with the EU, and continued to rebuild its relations with the countries of the region.
In the statement, it was emphasized that Turkiye continues to play an active diplomatic role in the war in Ukraine by negotiating on the expansion of the grain corridor.
In the statement, which also touched upon the factors that could lead to a possible rating increase by Fitch, it was stated that the improvement of macroeconomic stability, including an increase in confidence in the sustainability of the current policy normalization and rebalancing process, and a continuous decline in inflation as a result, could have a positive impact.
In the statement, it was reported that the decrease in external vulnerabilities due to the continuous narrowing of the current account deficit, increase in capital inflows, improvements in the level and composition of international reserves and decrease in dollarization may lead to a possible rating increase.
Fitch last confirmed Turkiye’s credit rating as “BB-” and its credit rating outlook as “stable” on August 13, 2021. The credit rating agency changed the country’s rating outlook to negative on December 2, 2021.
Source: Trthaber / Prepared by Irem Yildiz