S&P revises Türkiye’s outlook from ‘negative’ to ‘stable’

International credit rating agency Standard & Poor’s (S&P) revised Türkiye’s outlook from “negative” to “stable” and affirmed its credit rating at B on Friday.

The agency said the stable outlook reflects “balanced risks” on Türkiye’s creditworthiness after a return to orthodox monetary policy settings as the Central Bank raises interest rates.

“In an effort to disinflate and de-dollarize the economy, the Central Bank, under new leadership, has raised the key one-week repo rate by 21.5 percentage points since June, to 30%. To offset fiscal deterioration, the Treasury has introduced indirect taxes,” the global rating agency said in a statement.

“We believe that by 2026, absent renewed political uncertainty, the new team can rebalance Turkiye’s economy away from external debt-financed consumption and toward more balanced external and fiscal accounts, as well as more acceptable levels of inflation. Risks to this adjustment — both political and economic — are balanced,” it said.

The agency said it could revise Türkiye’s outlook to positive if the “effectiveness and independence of monetary and financial sector policies improved while Turkiye’s balance-of-payments position strengthened, particularly the CBRT’s (Central Bank’s) net foreign currency reserves.”

It also forecast Türkiye’s GDP growth to decelerate to 3.5%, before weakening to 2.3% in 2024.