The Turkish economy has reentered a “positive cycle,” overcoming the period of domestic and international uncertainties and difficulties, a top official said on Saturday, reiterating the aim to lower inflation.
“Our country’s credit rating has been upgraded. Our economy has overcome a period of domestic and international uncertainties and challenges, reentering a positive cycle,” Treasury and Finance Minister Mehmet Şimşek said in a post on X, referring to the latest upgrade of Türkiye’s rating by Moody’s.
Moody’s raised Türkiye’s long-term debt rating one notch, from “B1” to “Ba3,” with a “stable” outlook, the credit rating agency said on Friday.
Moody’s justified its decision by citing effective economic policies that have helped restore investor confidence in the Turkish lira.
It also highlighted the central bank’s commitment to the tight monetary policy that “durably eases inflationary pressures” and “reduces economic imbalances.”
“This rating increase confirms our successful management of the process and the resilience of our economy,” Şimşek further said.
“We are determined to permanently reduce inflation, maintain the current account deficit at a sustainable level, and strengthen budget discipline, excluding earthquake-related expenditures,” he added.
In a televised interview on Sunday, Şimşek reiterated his statement about returning to the “positive cycle,” citing the recovery in reserves since March.
“Our reserves were over $170 billion in mid-March and have now returned to that level. Therefore, we are back to the levels we were before these shocks began,” he noted.
“Our CDSs were around 256, reached 300, and now they are around 280 again,” he added. At the same time, he also pointed out that financial conditions have now eased, noting that growth continues at a moderate pace and that they have not experienced a significant deterioration in the current account deficit.
Regarding inflation goals, he recalled that the year-end inflation forecast is between 24% and 29%.
“We anticipate a midpoint between those figures. The core of our program is to combat the cost of living. That is, to permanently reduce inflation and increase our citizens’ purchasing power,” he said.
The annual inflation rate in Türkiye eased to 35.05% in June, slowing down significantly from around 75% in May 2024, according to official data.
The minister also said on X on Saturday that they aim to make “the gains of our program permanent through reforms that will drive structural transformation in industry, particularly in green and digital transformation.”
“As we continue to implement our program with patience and determination, our risk premium will further decrease, access to financing will increase and new rating upgrades will follow,” Şimşek said.
The Turkish government has been implementing an economic program with the main aim of lowering inflation to single digits, while also focusing on issues such as green and digital transformation, tax evasion and reducing the budget and current account deficits.
The Turkish central bank cut its key interest rate from 46% to 43% on Thursday, a slightly larger-than-expected reduction.
The institution began a series of rate cuts in December as inflation slowed, but on Thursday, it predicted a temporary rebound in monthly inflation in July.
In the longer-term, it expects inflation to ease to 24% by the end of this year and 12% by the end of 2026.
Apart from Moody’s, Fitch Ratings also affirmed the country’s rating at “BB-” on Friday, maintaining a “stable” outlook.
