Confidence in economic program increasing: Şimşek

ISTANBUL

Standard & Poor’s (S&P) has confirmed Türkiye’s credit rating as “B” and changed its credit rating outlook from “stable” to “positive.”

“Confidence in our medium-term program is increasing,” Treasury and Finance Minister Mehmet Şimşek wrote on social media platform X on Dec.1, commenting on S&P’s move.

The minister stressed they will continue to implement the program with patience and determination.

“We will take our country to a sustainable high growth path by ensuring price stability, a permanent decrease in the current account deficit, fiscal discipline and reserve accumulation,” Şimşek said.

Türkiye's new economic team has taken a series of steps to restore confidence in Turkish lira assets, rebalance the economy and ease the regulatory burden on the key financial sector, S&P said in a statement.

Turkish policymakers are making progress toward cooling down the overheated economy, while slowly rebuilding the central bank's depleted stock of net foreign currency reserves, it added.

Türkiye's Central Bank has increased its key interest rate by 31.5 percentage points since June, the ratings company noted, adding that deposit rates on local currency savings now exceed those on foreign currency savings products by nearly 40 ppts.

“This should encourage the de-dollarization of domestic savings.”

The Central Bank’s total gross reserves climbed to an all-time high of $136.5 billion as of Nov. 24. Foreign exchange reserves stood at around $91 billion, while gold reserves were at $45.5 billion.

Türkiye's twin deficits are declining, S&P also said.

It projects that the fiscal deficit for 2023 will be lower than targeted at 4.3 percent of GDP and that the current account deficit will gradually narrow as imports decline sharply during the last four months of the year and into 2024.

“If Türkiye's balance-of-payments improved further, leading to more rapid foreign currency reserve accumulation, and we saw a reduction in dollarization within the next 12 months, we could raise the long-term sovereign rating by one notch.”

S&P’s "B" rating is five notches below investment grade.

S&P forecasts the Turkish economy to expand 3.7 percent this year and 2.4 percent in 2024.

The GDP growth accelerated to 5.9 percent in the third quarter of 2023 from 3.9 percent from the previous quarter, but the quarterly expansion slowed from 3.3 percent to 0.3 percent, the official data showed this week.