Turkey’s credit rating was upgraded by Fitch, as the government’s return to orthodox economic policy reduces financial stability risks and balance-of-payments pressures.
Bloomberg, March 9, 2024 by Aslı Kandemir
Fitch moved Turkey’s rating one notch higher to B+ from B with a positive outlook, according to a statement Friday.
The move “reflects increased confidence in the durability and effectiveness of policies implemented since the pivot in June 2023, including greater-than-expected front-loading of monetary policy tightening, in reducing macroeconomic and external vulnerabilities,” wrote analysts including Erich Arispe Morales.
Since Fitch raised Turkey’s rating outlook to stable from negative on Sept. 9, the central bank has further increased its policy rate by 2,000 basis points to 45% and has taken additional tightening steps to tackle inflation running at almost 70%.
The central bank’s gross foreign currency reserves rose to $80.5 billion as of March 1, up from $56.5 billion at the end of May, when President Recep Tayyip Erdogan’s reelection signaled the start of the policy reversal. In recent weeks, reserves have come under pressure from increased demand for foreign currency.
Policymakers led by Treasury and Finance Minister Mehmet Simsek have been calling for a ratings upgrade, criticizing rating firms for falling behind markets with their assessment of Turkey.
“The positive outlook indicates that credit upgrades will continue,” Simsek said in a post on X on Saturday. “Macro financial stability will strengthen thanks to disinflation, a narrowing current-account deficit and budget discipline in the second half of the year, and our credit rating will improve.”
In January, Turkey’s credit outlook was lifted to positive from stable at Moody’s Ratings, which scores the country at B3, six notches below investment grade. S&P Global Ratings raised the country’s rating outlook to positive in December, affirming it at B.