S&P Global Ratings, in its assessment regarding the effects of the process that led to the liquidation of approximately 18 billion dollars in funds in Turkey on the financial system, reported that the developments did not trigger a widespread loss of confidence in the Turkish Lira.
According to the institution's analysis, a significant portion of the resources exiting the funds moved into Turkish Lira-denominated bank deposits rather than foreign currency. The fund investigation that began in September and the liquidation of certain investment funds caused a sharp correction in the stock market due to forced asset sales.
S&P, however, assessed that a wider contagion in the financial system was prevented thanks to the Central Bank of the Republic of Turkey (TCMB) providing rapid liquidity and the implementation of differentiating measures within the regulatory framework.
The assessment stated that households maintaining their confidence in the Turkish Lira and limited demand for foreign currency allowed the TCMB to partially rebuild its foreign exchange reserves. As of September, the share of foreign currency-denominated deposits in total bank deposits was 38.7 percent. This rate remained close to the level at the beginning of the year.
INFLATION AND GROWTH EXPECTATIONS
S&P pointed out that the rise in energy prices following the war in West Asia could create upward pressure on inflation in Turkey. The institution expects annual average inflation to be 30.9 percent in 2026 and 21.7 percent in 2027.
It was stated that the institution's decision to maintain Turkey's credit rating outlook as "stable" was influenced by the assumptions that tight monetary policy and wage-setting policies would be maintained and that there would be no further erosion in foreign exchange reserves. According to S&P, maintaining these conditions is important for the economy to manage the current shock in energy prices.
On the growth side, S&P announced that it expects the Turkish economy to grow by 3.7 percent in 2025 and for growth to decline to 3 percent in 2026. The institution lowered its 2026 forecast by 0.4 percentage points compared to its previous projection due to the economic effects of the war. Growth is expected to accelerate again in 2027, reaching 3.7 percent.
According to S&P's projections, the budget deficit is expected to approach 3 percent in 2026 after realizing at 2.6 percent of gross domestic product in 2025. The ratio of public debt to national income is projected to remain below 30 percent.
S&P Global Ratings confirmed Turkey's credit rating as "BB-/B" in its last assessment in April and left the outlook at the "stable" level. The institution did not publish the Turkey assessment that was expected to be released on October 16.
News Source: 12punto
