Turkey's credit rating upgraded: International agency announces

International credit rating agency Standard & Poor's (S&P) has upgraded Turkey's credit rating from "B+" to "BB-" and set the credit rating outlook to "stable."

S&P has announced its assessment regarding the Turkish economy.

In the statement issued by the credit rating agency, it was reported that Turkey's long-term credit rating was upgraded from "B+" to "BB-" and the credit rating outlook was "stable." It was also noted that the country's short-term credit rating of "B" was affirmed.

The statement conveyed that the Central Bank of the Republic of Turkey's (TCMB) tight monetary policy stance has enabled Turkish authorities to stabilize the lira, reduce inflation, rebuild reserves, and de-dollarize the financial system.

The statement, which noted that Turkey's savings gap with the rest of the world is narrowing, expressed that this situation is reflected in the approximately 4-point decline recorded in the current account deficit to Gross Domestic Product (GDP) ratio since 2022.

The statement noted that the outlook is stable, reflecting balanced risks over the next 12 months regarding the authorities' ambitious plans to reduce still-high inflation, manage employees' wage expectations, and rebalance the Turkish economy.

In S&P's statement, it was indicated that the rating could be upgraded if further progress is made in reducing inflation to single-digit levels and restoring long-term confidence in the Turkish lira and, more broadly, in local capital markets.

The statement pointed out that indexing the wage increase rate to the 2024 inflation rate of approximately 44 percent, rather than the government's 2025 year-end inflation target of 17 percent, poses a risk to the anti-inflation program.

The statement, which conveyed the assumption that the wage agreement would be determined between these two extremes, noted that any increase rate higher than 30 percent would prolong the anti-inflation process.

The statement indicated that since there are no scheduled elections in the country until 2028, there may be room to suppress demand and inflation through gradual fiscal and income policy tightening.

The statement, which pointed out that a slowdown in private consumption will play a central role in cooling the Turkish economy, reported that real GDP growth is projected to be 2.3 percent in 2025.

S&P last upgraded Turkey's credit rating from "B" to "B+" in May, while maintaining the credit rating outlook as "positive."