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Investing.com -- Moody’s Ratings has upgraded Turkiye’s long-term foreign and domestic currency issuer ratings to Ba3 from B1 and changed the outlook to stable from positive.
The upgrade reflects the strengthening track record of effective policymaking, particularly the central bank’s adherence to monetary policy that eases inflationary pressures, reduces economic imbalances, and gradually restores confidence in the Turkish lira. Moody’s also noted that the risk of a policy reversal has receded.
Inflation in Turkiye has dropped to 35% year over year in June 2025 from 72% in June 2024. Moody’s projects annual inflation to fall to around 30% by the end of 2025 and to approximately 20% by the end of 2026.
The central bank’s improving credibility was demonstrated by its response to pressure on the Turkish lira during March-April 2025 following domestic political unrest and the announcement of US tariffs. Significant tightening of interbank liquidity and a large interest rate hike helped stabilize the lira.
Turkiye’s current account deficit has narrowed sharply to 0.9% of GDP in the 12 months to March 2025 from a peak of 5.4% of GDP in the 12 months to March 2023. Moody’s expects real GDP growth to slow to 2.2% in 2025 from 3.2% in 2024 before rising back to 3.2% in 2026.
The stable outlook balances upside and downside risks. On the upside, extending the track record of effective policymaking could support improvement in Turkiye’s external position more substantially than currently assumed. The government’s ongoing and planned structural reforms could improve resilience to external shocks.
Conversely, a possible return to policies that would fuel economic imbalances represents a key downside risk. Given its still relatively weak external position, Turkiye remains vulnerable to large balance of payments shocks.
Moody’s has also raised Turkiye’s local-currency country ceiling to Baa3 from Ba1 and the foreign-currency ceiling to Ba2 from Ba3.
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