Fitch Ratings’ Assessment of Turkey’s Monetary Policy: More Consistent Than Before

The international credit rating agency Fitch Ratings improved Turkey’s credit outlook in a positive direction, changing the rating outlook from “negative” to “stable.” Fitch Ratings’ Senior Director, Erich Arispe Morales, mentioned that the primary reason behind this decision was Turkey’s monetary policy changes.

Erich Arispe Morales, the Senior Director of Fitch Ratings, emphasized that the changes in Turkey’s monetary policy have reduced uncertainties and shifted towards a more consistent direction. Furthermore, he stated that this new policy approach has alleviated pressure on reserves and contributed to a slight reduction in uncertainties in the post-election period.

Economic Growth Forecasts

Morales announced that Turkey had recorded higher economic growth than expected in the second quarter of this year and predicted that the economy would grow by approximately 4.3 percent in 2023. Additionally, he stated that if policy consistency, a tight fiscal credit environment, and high interest rates continue, the economy could show growth of around 3 percent next year. It is expected that economic growth will reach 3.4 percent in 2025.

Recommendations for Credit Rating Upgrade

Morales expressed that Turkey needs to take certain steps to achieve potential credit rating upgrades and reach the “investment-grade” rating level. These steps include reducing inflation, controlling the current account deficit, and increasing international reserves. It was also emphasized that attention should be paid to Turkey’s financing needs and foreign exchange reserve levels.

Financial Relations with Gulf Countries

Morales highlighted that Turkey’s financial relations with Gulf countries and the decision by the World Bank to increase its investments in Turkey are extremely positive developments. These types of financial resources are crucial for Turkey and enhance economic flexibility and predictability.

Fitch Ratings’ positive evaluation of Turkey’s credit rating and outlook reflects the impact of the country’s monetary policy changes and economic reforms. However, warnings are issued about the need for significant steps to be taken for credit rating upgrades and attaining a higher credit rating. Turkey’s financing needs and economic stability are closely monitored by investors.

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