Moody’s changes Türkiye's outlook to 'positive,' affirms 'B3' credit rating

Moody’s on Friday revised Türkiye's outlook to "positive" from stable, affirming its "B3" credit rating, Azernews reports, citing Anadolu Agency.

"The main driver of the outlook change to positive is the decisive change in economic policy, in particular the return to orthodox monetary policy, which, if maintained, materially improves the prospect for reducing Turkiye's major macroeconomic imbalances," the international credit rating agency said in a statement.

"While headline inflation is likely to rise further in the near term, there are signs that inflation dynamics are starting to turn, indicative of monetary policy regaining credibility and effectiveness," it said.

"The monetary tightening also improves the prospects for a reduction of Turkiye's large external imbalance and for a rebuilding of the central bank's foreign-currency reserves, both of which would reduce the country's vulnerability to external shocks," read the statement.

Moody's expects the reduction in external deficit to accelerate further in 2024, with a full-year deficit below $40 billion (3.3% of GDP).

The agency said it "would likely upgrade Turkiye's ratings if the current monetary policy stance was maintained beyond the upcoming municipal elections and through emerging evidence of a growth slowdown, raising confidence that inflation will start to slow in the second half of the year and that macroeconomic imbalances are being durably reduced."

It said given the positive outlook, a negative rating action is unlikely.

Moody's updated Türkiye's credit rating to "B3" on Aug. 12, 2022, and changed the outlook to "stable."

The rating agency's calendar included June 16 and Dec. 15, 2023, for the evaluation of Türkiye's credit rating, but no update was made on those days.