S&P upgrades Turkey's credit outlook to stable

International credit rating agency Standard & Poor's (S&P) has reaffirmed Turkey's credit rating as "B" while upgrading its credit outlook from "negative" to "stable," shortly after Fitch Ratings revised Turkey's credit outlook, signaling a positive shift in the country's economic prospects.

In its statement, S&P expressed optimism that the recent reduction in political uncertainty would enable Turkey's new leadership to steer the economy towards a more balanced external and fiscal position, away from consumption driven by foreign borrowing, and towards more acceptable levels of inflation by 2026.

The effectiveness and independence of monetary and financial sector policies have improved, according to the agency, with the potential for a positive outlook if Turkey's balance of payments position, especially the net reserves of the Central Bank, strengthens. S&P expects cautious interest rate hikes to continue in 2023.

S&P also provided growth forecasts for the Turkish economy in its announcement, predicting a growth rate of 3.5% for this year and 2.3% for the next.

This move by S&P follows its previous decision in March to maintain Turkey's credit rating at 'B' while shifting the credit outlook from stable to negative. Another leading credit rating agency, Fitch, had also upgraded Turkey's credit outlook on September 8, citing a return to a more traditional policy mix.