S&P has released an assessment regarding recent political developments in Turkey, warning that the arrest of opposition politicians could pose a risk to economic confidence and currency stability.
In its report, S&P noted that since the end of 2023, Turkish authorities have made significant progress in persuading households to shift their savings from gold and foreign currencies back into the local currency. This shift has helped increase the country’s foreign exchange reserves and supported Turkey’s credit rating by encouraging lower inflation.
Political Tensions Could Disrupt Economic Reforms
However, S&P cautioned that a resurgence of political tensions could hinder these economic reforms. The report highlighted that in response to recent instability, the Central Bank of the Republic of Turkey has conducted emergency interventions, leading to increased foreign exchange sales, higher liquidity, and a rise in overnight borrowing rates.
S&P emphasized that rising uncertainty could have secondary effects on household spending, capital inflows, exchange rates, economic growth, and inflation. These risks could interrupt the recent progress in deposit de-dollarization and inflation reduction, posing significant economic challenges.
Source: Bloomberght/ Prepared by: İlayda Gök