Turkey report from Moody’s: Positive recovery will take time

moody's

Credit rating agency Moody’s published a report for Turkey and stated that the recovery in Turkey’s institutional capacity will take time even in a positive scenario. Moody’s announced that it expects 2 more limited interest rate hikes from the CBRT before the interest rate hikes are suspended.

International credit rating agency Moody’s published a ‘Credit Opinion’ report for Turkey.

“Our credit view reflects economic strength and moderate debt against erosion in institutional and governance strength that will take time to recover, even in a favorable scenario,” the report, which was shared only with subscribers, said.

Turkey’s headline inflation is still high and is expected to continue to rise in the coming months.

It warned that a sharp slowdown in growth could increase the risk of a new policy shift.

“The improvement in the current account balance and rising reserves are positive for the credit outlook. The credit outlook can be improved if the tight monetary policy is sustainable and salary increases are in line with the CBRT’s target.”

The institution expects the Turkish economy to grow by 4 percent in 2023, 2.5 percent in 2024 and 3 percent in 2025. Average inflation is expected to be 53.5 percent this year, 58.9 percent in 2024 and 39.1 percent in 2025.

The current account deficit to GDP ratio is projected to be 4.7 percent this year, 3.4 percent in 2024 and 3 percent in 2025.

Moody’s expects 2 more limited interest rate hikes from the CBRT before a break in interest rate hikes.

The report stated that the credit outlook could be downgraded to negative if orthodox policies are short-term, as in 2021.

Moody’s announced last Friday that there was no assessment of Turkey’s credit rating. Moody’s currently rates Turkey’s credit rating as “B3” and the outlook as “B3”.

Source: BloombergHT

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