S&P raises Türkiye's rating to BB- with stable outlook

ISTANBUL

Standard & Poor's (S&P) has raised Türkiye's long-term sovereign credit rating to BB- from B+ with a stable outlook, the rating agency announced on Friday.

S&P cited the Central Bank of the Republic of Türkiye's (CBRT) tight monetary stance as a key factor in stabilizing the lira, reducing inflation, rebuilding reserves, and de-dollarizing the financial system.

"Türkiye's savings gap with the rest of the world has narrowed, which is visible in the approximately 4 percentage points of GDP decline in the current account deficit since 2022," S&P stated.

The stable outlook reflects balanced risks over the next 12 months regarding authorities' plans to further reduce inflation, manage wage expectations, and rebalance the economy. S&P expects the current economic team to maintain tight monetary policy despite implementation risks associated with the government's medium-term program.

The agency warned it could lower ratings if pressures on Türkiye's financial stability or public finances intensify. Conversely, ratings could be raised if inflation approaches single digits and confidence in the lira and domestic capital markets improves.

S&P projects real GDP growth to ease to 2.3% in 2025, down from 3.1% this year, due to tighter credit conditions and lower labor demand. However, stronger exports are expected to partially offset these factors, with a gradual economic recovery anticipated from 2026.

Upgrade marks a significant endorsement of Türkiye's recent economic policies and could potentially boost investor confidence in the country's financial markets.