International credit rating agency Moody’s has upgraded the credit ratings of Turkey to Ba3 from B1, citing stronger monetary policy and growing investor confidence, while it has changed the country’s outlook to stable from positive, reflecting a more balanced view of the risks and opportunities facing the Turkish economy.
According to Moody’s, 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 signals cautious optimism as Turkey continues to tackle inflation, enhance monetary stability, and attract foreign investment. The stable outlook reflects Moody’s balanced perspective on Turkey’s future economic direction.
Upside and downside risks
There are both upside and downside risks that could influence the credit profile further. Looking at the upside potential, continued independent and credible policymaking may strengthen Turkey’s external position, while planned structural reforms, such as reducing energy import dependence and boosting export competitiveness, could improve economic resilience to external shocks. Conversely, a possible return to policies that would again fuel economic imbalances represents a key downside risk.
