Fitch's commentary on Turkey: 'Positive for Turkey's credit rating'

According to a statement from the International Credit Rating Agency Fitch, it was stated that the expected tightening in the fiscal stance in Turkey following the local elections would strengthen the effectiveness of monetary policy.

The statement pointed out that sustaining this improvement in policy consistency would lead to lower inflation, a narrower current account deficit, and a recovery in international reserves, noting that this situation could be positive for Turkey's credit rating.

"PUBLIC EXPENDITURES ARE CAUSING A BUDGET DEFICIT"

The statement indicated that public spending prior to the local elections caused the budget deficit to grow, and it was estimated that the central budget deficit in the first quarter reached 5.2 percent of the gross domestic product (GDP).

The statement, which noted that the non-interest deficit is also projected to be 2.6 percent of GDP, stated that fiscal policy contributed to the resilience of domestic demand in the first quarter.

The statement conveyed that the government is expected to reduce the fiscal deficit for the remainder of the year by slowing the growth of expenditures, particularly those unrelated to earthquake reconstruction.

OPPOSITION SUCCESS WILL HAVE AN IMPACT

It was noted that the design of new revenue-enhancing measures should take into account potential inflationary effects, and that the opposition's success in the local elections could influence the pace, scale, and scope of fiscal adjustments.

The statement recorded that Turkey's public finances will continue to remain creditworthy compared to its peers when considering low debt levels, a strong revenue base, manageable debt amortizations, and improving financing conditions.

On the other hand, it was also explained that public finances are exposed to currency risk, high interest rates, and inflation.