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Turkey finance minister cites economic programme after S&P upgrade

By News Desk
May 05, 2024
Turkish Finance Minister Mehmet Simsek. — World Economic Forum
Turkish Finance Minister Mehmet Simsek. — World Economic Forum

ISTANBUL: Turkish Finance Minister Mehmet Simsek on Saturday cited positive results of the government's economic programme in response to credit ratings agency S&P upgrading Turkey's ratings to "B+" from "B".

"We are determined to carry the confidence in our country to the highest level with our strengthened programme," Simsek wrote on the X social media platform.

Credit ratings agency S&P on Friday upgraded Turkey's ratings to "B+" from "B", saying that the coordination between monetary, fiscal, and income policy is set to improve, amid external rebalancing.

Moody's credit rating agency raised Turkey's credit rating outlook from stable to positive in January. In March, Fitch Ratings also upgraded Turkey's credit rating from "B" to "B+" and changed its rating outlook from stable to positive.

The credit action comes a week after the Turkish central bank kept its policy rate unchanged at 50 percent.

Turkey's central bank, which announced a 500 basis-point rise in March, said on Friday that inflationary pressures remained alive.

The central bank has hiked rates by 3,650 basis points since June last year.

The ratings agency said it could consider raising Turkey's sovereign rating if policymakers manage to reduce inflation, restore confidence in the lira, narrow current account deficits, and reverse dollarization.

"We don't anticipate the inflation rate in Turkiye dropping to single digits until 2028," the agency said in a statement.

Minister Simsek said the successful outcomes of their ongoing economic program have reverberated in the assessments of credit rating agencies.

“S&P upgraded Turkey's credit rating by one notch after 11 years and maintained its positive outlook. The optimistic outlooks of S&P, Fitch and Moody's signal further credit upgrades. With unwavering determination, we are determined to maximize confidence in our country by persistently strengthening and implementing our program.”

Commenting on the credit rating upgrade, Istanbul Chamber of Commerce (ITO) President Sekib Avdagic emphasized that following Fitch, S&P Global also upgraded Turkey's credit rating from “B” to “B+” and maintained its credit rating outlook as “positive.”

"With the commencement of the disinflation process, particularly in the latter part of the year, we anticipate bolstering confidence in the economy both domestically and internationally, fostering an accelerated influx of foreign capital. As our concerted efforts against inflation persist, marked by coordination and resolve, the Turkish economy stands to emerge victorious.

The current and anticipated upticks will significantly bolster market sentiment and Türkiye's outlook," Avdagic stated.

Experts also consider S&P's upgrade of Turkey's credit rating an important development and expect other credit rating agencies to make similar upgrades.

Timothy Ash, an emerging markets strategist at Bluebay Asset Management, praised the decision, attributing it to the effective policy arrangements implemented by Simsek and his team. “Turkey's resilience in overcoming economic risks necessitated this development,” Ash said.