Fitch upgrades Turkey’s rating to B+ on tighter monetary policies- Republic World

Turkey credit rating upgrade: Fitch Ratings announced on Friday an upgrade of Turkey’s sovereign credit rating to “B+” from “B,” citing the effectiveness of tighter monetary policies in combating inflationary pressures.

The decision follows Turkey’s central bank’s decision to maintain its key interest rate unchanged in February.

In its statement, Fitch noted, “The upgrade reflects increased confidence in the durability and effectiveness of policies implemented since the pivot in June 2023.” Additionally, the agency revised Turkey’s outlook from stable to positive.

Since President Tayyip Erdogan’s re-election in May, Turkey has shifted away from its unconventional low-interest-rate strategy toward a tightening approach. The central bank has raised its key interest rate significantly, from 8.5 per cent to 45 per cent, since June.

Despite these efforts, inflation surged to an annual rate of 67.07 per cent in February, surpassing expectations and underscoring the need for continued tight monetary policy. Economists anticipate a gradual decline to around 40 per cent by year-end.

Turkish Finance Minister Mehmet Simsek hailed the rating upgrade as a tangible outcome of the government’s economic program and its commitment to rule-based and predictable policies. He emphasised on the social media platform X, “Macrofinancial stability will be further strengthened, and our credit rating will increase in H2 with disinflation, narrowing current account deficit, and budget discipline.”

Looking ahead, Turkey is poised to implement further policy measures aimed at curbing inflation following local elections scheduled for March 31. However, these efforts may bring additional challenges for Turkish citizens already grappling with the repercussions of years of soaring prices, according to data and some economists.

(With Reuters inputs.)