S&P upgrades Türkiye to 'B+' on economic rebalancing, says outlook positive

The US-based credit rating agency Standard & Poor's [S&P] has upgraded Türkiye's credit rating from B to B+ on economic rebalancing and kept its outlook positive.

"We have raised our long-term unsolicited ratings on Türkiye to 'B+' from 'B' and assigned a positive outlook," S&P said on Friday in a statement.

Following local elections in the country, "we believe the coordination between monetary, fiscal, and incomes policy is set to improve, amid external rebalancing."

S&P forecast rising portfolio inflows and narrowing current account deficits over the next two years, alongside declining inflation and dollarisation, "although progress will be slow and reserve accumulation modest as the central bank limits depreciation of the Turkish lira."

S&P also revised its transfer and convertibility assessment to 'BB-' from 'B+', "signifying that the risk of the sovereign preventing private-sector debtors from servicing foreign currency-denominated debt is abating."

The credit rating agency said it could raise the rating further should balance-of-payments outcomes continue to improve, inflation decline, and domestic savings in Turkish lira rise, leading to a rebuilding of the government's usable foreign currency reserves [gross reserves minus foreign currency borrowed from domestic residents].