Turkey’s Credit Rating Upgraded by ⁣Fitch Amid Improved Fiscal Policy

Reuters

Credit rating agency Fitch has upgraded Turkey’s long-term foreign currency Issuer Default Rating to “BB-“‌ from “B+”, ‌citing improved fiscal ​policy and enhanced external ‌buffers.

Turkey’s Economic Reforms

Turkey has been implementing a tight⁤ monetary and ⁣fiscal policy⁢ since ​last year ‍to‌ tackle ‍rising inflation, which peaked at 75% in May.⁤ Annual ⁢inflation fell to 51.97% in⁣ August, driven by higher rates compared to last year and⁤ lower food prices.

Central Bank’s⁣ Stance on Monetary Policy

However, the central bank has ⁢claimed that ⁣it will maintain its monetary policy tight‌ until inflation is in line with its targets. In its medium-term economic program released on ⁤5 September, the ‍government predicted that ‍inflation would fall‌ to 41.5% in 2024, 17.5% in 2025, and 9.7% by ⁣2026.

Fitch’s ⁤Outlook

Fitch stated‍ that ‍tighter monetary policies, ⁤proposed budget cuts, and wage ‍adjustments will lead to lower inflation and‌ current account deficits,⁢ ultimately helping to maintain better ⁤foreign exchange reserves. However, ‍the ​rating agency noted that “the risk of a policy reversal remains present … given Turkiye’s‍ recent history, the strong belief, at⁣ the highest political levels, in low interest rates,‍ and the opposition‍ possible by vested interests.”

Rating Agency Upgrades

Fitch, which has ‍upgraded‍ Turkey’s⁣ credit rating for ‍the second time this year, has also changed its outlook from “positive” to⁢ “stable”. In July, rating ​agency Moody’s upgraded Turkey’s⁣ rating to “B1” from “B3,” citing improvements in governance and a tougher stance on monetary policy.‌ In May, the credit⁤ rating agency S&P also upgraded⁣ Turkey’s ratings to ⁣”B+”‌ from “B,” ‌saying that ⁤the‌ coherence between monetary, fiscal and income ‌policy is ⁣set to improve, amid external rebalancing.