Moody’s: Policy Change Is A Positive Factor in Turkey

International credit rating agency Moody's stated that policy change in Turkey is a positive factor in terms of credit.

The international credit rating agency Moody’s headquarters in London answered the questions of AA. In Moody’s statement, following expressions were used "The policy change that has led to the strengthening of the currency, the renewal of capital inflows, the cessation of the decrease in foreign exchange reserves and that has been continuing since November is a net positive credit element. We need to see that the more coherent policy framework is maintained. We also take into account that domestic confidence has not yet been restored, as can be seen from the ongoing high level of dollarization."  

What Are the Factors Affecting the Grade and Outlook Positively?

In the statement of the organization, it was pointed out that it is very unlikely that the outlook will be converted directly to positive or its rating will be increased due to the fact that Turkey's credit rating outlook is 'negative', while the following are recorded regarding which developments may positively affect Turkey's rating outlook in the upcoming period: "If the recent transition to more consistent fiscal and monetary policies is permanent and reflects on the decline in inflation, the strengthening of the currency and the decrease in dollarization, the rating outlook may be balanced (stable outlook). A continued decrease in tensions with the USA and the European Union will also be positive. A decisive set of economic reforms that respond and also take advantage of the country's inherent strengths could lead to upward rating pressure in the medium term."  

What Supports Moderate Growth?

Commenting on the growth outlook of the Turkish economy, Moody's said, "The strong growth in 2020 was largely due to the strong credit expansion, which we consider to be unsustainable. This also contributed to high inflation." The statement included the following: "While the stronger global growth and the arrival of foreign tourists in the summer will provide some support to the Turkish economy this year, there are other factors that will moderate growth, especially much more moderate loan growth and higher interest rates." In Moody's 'Global Economic Outlook' update report published on February 24, 2021, the organization's growth estimates for the Turkish economy were revised from 3.5 percent to 4 percent for 2021 and from 4 percent to 5 percent for 2022. The organization last announced on December 4, 2020 that no updates were made regarding Turkey's rating and outlook.     Source: AA