BAKU, Azerbaijan, July 26. Moody's Ratings has upgraded the Government of Turkiye's long-term foreign- and domestic-currency issuer and foreign-currency senior unsecured ratings to Ba3 from B1 and changed the outlook to stable from positive, Trend reports.
“The upgrade reflects the strengthening track record of effective policymaking, more specifically in the central bank's adherence to monetary policy that durably eases inflationary pressures, reduces economic imbalances, and gradually restores local depositor and foreign investor confidence in the Turkish lira. The upgrade also reflects the view that the risk of a policy reversal has receded, although it will remain present in the coming years.
The stable outlook balances upside and downside risks to Turkiye's credit profile. On the upside, extending the track record of effective policymaking without political interference has the potential to support the improvement in Turkiye's external position more substantially than we currently assume,” said the rating agency.
Furthermore, Moody’s experts note that the government's ongoing and planned structural reforms could improve Turkiye's resilience to external shocks by further reducing its energy import dependence and increasing the competitiveness of exports.
“Conversely, a possible return to policies that would again fuel economic imbalances represents a key downside risk. Given its still relatively weak external position, captured by the central bank's comparatively modest foreign-currency buffers, Turkiye also remains vulnerable to large balance of payments shocks.
Concurrently with today's rating actions, we have raised Turkiye's local-currency country ceiling to Baa3 from Ba1. The three-notch gap between the local-currency ceiling and the sovereign issuer rating reflects the improving track record of monetary and macroeconomic policy effectiveness and a relatively limited government footprint in the economy. These factors are balanced against Turkiye's exposure to elevated political risks and the risk of a reversal in the current policy direction,” reads the latest report by the rating agency.
Moreover, Moody’s notes that the tight monetary policy stance is yielding tangible results.
“For instance, inflation has dropped to 35% year over year in June 2025 from 72% in June 2024, and measures of inflation expectations indicate the central bank's improving credibility. We project Turkiye's annual inflation to fall to around 30% by the end of 2025 and to around 20% by the end of 2026. Nevertheless, inflation and inflation expectations will even then remain well above the level before the 2021-2024 inflation shock and higher than other Ba-rated sovereigns,constraining our assessment of Turkiye's credit profile.
We expect domestic demand to remain subdued in the coming two years and real GDP growth to slow to 2.2% in 2025 from 3.2% in 2024 before rising back to 3.2% in 2026, remaining below the economy's potential growth estimates ranging from 3.5% to 4.5%.”