S&P’s Decision on Turkey: Credit Rating Outlook Revised to Positive

Standard & Poor’s has revised Turkey’s ‘stable’ credit rating outlook to ‘positive’.

The international credit rating agency Standard & Poor’s (S&P) has not remained indifferent to the positive developments in the Turkish economy.

Due to recent policy adjustments in Turkey, an extraordinary review was conducted, leading to a change in the credit outlook.

In a statement from S&P, it was emphasized that policy makers are making progress in cooling down the overheated economy, while the Central Bank of the Republic of Turkey (TCMB) is gradually rebuilding its depleted net foreign exchange reserves.

The statement pointed to the interest rate hikes made by TCMB since June, highlighting that the country’s twin deficits have also decreased.

It was reported that the budget deficit for 2023 is expected to be lower than the targeted rate of 4.3% of gross domestic product (GDP), and with a sharp decline in imports, a gradual narrowing of the current account deficit is anticipated.

Credit Rating Outlook Revised to Positive

It was noted in the statement that Turkey’s credit rating was confirmed as ‘B’, and the credit rating outlook was revised from stable to positive. The statement mentioned that if there is further improvement in the balance of payments, faster increase in foreign exchange reserves, and a decline in dollarization in the next 12 months, the long-term country rating could be upgraded by one notch.

In September, S&P had confirmed Turkey’s credit rating as ‘B’, while upgrading the outlook from negative to stable.

Turkish Economy Rebalanced

The statement mentioned that tighter credit conditions imposed by Turkey’s new economic team are expected to help the economy avoid a direct recession. Recent data confirms that since the beginning of the third quarter, consumption has weakened, slowing down and rebalancing the Turkish economy.

It was indicated that the Turkish economy is expected to grow by 3.7% this year and by 2.4% in 2024.

Furthermore, the statement shared information that the next planned assessment for Turkey will be conducted in 2024.

As Yusuf Boz from NotteGlobal.com, commenting on the impact of Standard & Poor’s recent upgrade of Turkey’s credit outlook to positive, I would say this is a significant and promising development for the Turkish real estate market. Here’s why:

1. Increased Investor Confidence: The upgrade to a ‘positive’ outlook by a major rating agency like S&P is a strong signal to investors worldwide about the stability and growth potential of Turkey’s economy. This could lead to increased foreign investment in the real estate sector, as investors seek opportunities in a more stable and growing market.
2. Improved Economic Stability: The revision reflects improvements in the Turkish economy, including better management of fiscal policies and a cooling down of the previously overheated economy. A more stable economic environment generally leads to a healthier real estate market, as it increases consumer confidence and purchasing power.
3. Interest Rate Implications: The Central Bank of the Republic of Turkey’s (TCMB) efforts in managing the interest rates effectively, as noted in S&P’s report, may lead to more favorable mortgage rates.
4. Long-term Growth Prospects: The positive outlook, combined with projections of economic growth in the coming years, suggests a long-term upward trend for the real estate market. Investors and buyers might see this as a good opportunity for long-term investment.

In conclusion, S&P’s revision of Turkey’s credit rating outlook to positive is likely to have a beneficial impact on the real estate market, fostering growth, stability, and attracting both local and foreign investments.