S&P revises Turkey's credit outlook to positive
International credit rating agency Standard & Poor's (S&P) has affirmed Turkey's credit rating at "B" while revising its outlook from "stable" to "positive."
AA
S&P conducted an unscheduled assessment due to recent policy adjustments in Turkey, resulting in a revision of the country's credit outlook.
REDUCTION IN TWIN DEFICITS
In a statement, the agency emphasized that while policymakers are making progress in cooling an overheating economy, the Central Bank of the Republic of Turkey (TCMB) is also gradually rebuilding its depleted net foreign exchange reserves. Pointing to the interest rate hikes implemented by the TCMB since June, the statement highlighted that the country's twin deficits are also decreasing.
The statement reported that the 2023 budget deficit is expected to be lower than the targeted 4.3 percent of the gross domestic product (GDP), and that the current account deficit is projected to narrow gradually as imports decline sharply.
Noting that Turkey's credit rating was affirmed at "B" and the outlook was revised from "stable" to "positive," the statement indicated that the long-term sovereign rating could be upgraded by one notch if the balance of payments continues to improve, foreign exchange reserves increase more rapidly, and a decline in dollarization is observed over the next 12 months.
TURKISH ECONOMY REBALANCING
The statement expressed that with Turkey's new economic team further tightening credit conditions, the economy is expected to avoid a direct recession. It noted that recent data confirms the Turkish economy is both slowing down and rebalancing, with consumption weakening since the beginning of the third quarter.
The statement projected that the Turkish economy would grow by 3.7 percent this year and 2.4 percent in 2024.
Furthermore, the statement shared that the next scheduled assessment for Turkey will take place in 2024.