Türkiye's Economic Resilience: Fitch's Vote of Confidence

Türkiye's Economic Resilience: Fitch's Vote of Confidence

In an insightful interview with Anadolu Agency, Erich Arispe Morales, a senior director at Fitch Ratings, shared his optimism about Türkiye's economic trajectory.

The recent upgrade of Türkiye's credit rating from "B" to "B+" with a positive outlook reflects a growing confidence in the country's economic policy pivot. Morales highlighted key factors contributing to this positive assessment, including improved reserve levels, a decrease in contingent liabilities, a narrowing current account deficit, and easing inflation expectations.

The analyst emphasized the market's positive response to Türkiye's policy changes, noting increased access to external financing for both sovereign entities and private sectors. Additionally, the decline in Türkiye's five-year credit risk premium signals a healthier economic environment.

Looking ahead, Morales projects a further reduction in the current account deficit, anticipating it to drop to 2.6% of GDP in 2024 and 2.2% in 2025. He also expects an improvement in international reserve levels, which could enhance Türkiye's reserve coverage to surpass the median for similarly rated countries by 2025.

The article also addresses the decline in FX-protected deposits and its impact on financial dollarization. Morales expresses greater confidence in the sustainability of Türkiye's policy shift, attributing it to a combination of global economic factors and domestic policy measures.

Inflation remains a challenge, with expectations of a significant decline over the next few years. Despite some upward pressure from policy measures and increased public spending, Fitch maintains its expectation for a gradual decrease in inflation, aligning with the central bank's projections