Karen Vartapetov, S&P Global’s director and chief analyst responsible for Central and Eastern Europe and Türkiye, said in a statement to Reuters that Türkiye’s BB- credit rating reflects the recovery in reserves in recent years, the decrease in dollarization and the return to more traditional economic policies.
Stating that the decline in inflation slowed down due to various internal and external shocks, Vartapetov said, “Disinflation was delayed but did not derail.”
According to Vartapetov, who says that high energy prices make it difficult to fight inflation, the slowdown in domestic demand shows that the tight monetary policy has begun to reflect on the economy.
Stating that the Central Bank’s reduction of the policy rate by 100 basis points yesterday was in line with market expectations, Vartapetov said that they expect the policy rate at 35% at the end of the year.
However, Vartapetov emphasized that the election process will be an important test for economic policies.
“The new economic management has gained a certain amount of confidence, but more is needed. It is not yet clear how tight monetary and macroeconomic policies can be sustained in the face of the upcoming elections. This is one of the main issues we are monitoring,” he said.
The next general election will be held in May 2028. However, the government says that the election can be held towards the end of the first quarter of 2028.
FUNDING CRISIS IS MORE ABOUT LACK OF GOVERNANCE AND AUDIT
Vartapetov said that the investment fund crisis that emerged last month was evaluated by S&P within the framework of corporate governance and audit deficiencies rather than a risk for the financial system.
Vartapetov pointed out that most of the money coming out of the funds was directed to TL deposits, not foreign currency or gold, and noted that they did not see any signs that the crisis was spreading to the financial system or creating pressure on foreign exchange reserves.
“We consider this incident as a governance issue rather than a large-scale financial crisis,” said Vartapetov, adding that what steps the authorities will take to strengthen supervisory mechanisms will be decisive in the future.
Stating that institutional capacity, quality of governance and effectiveness of institutions have an important place in S&P’s country rating evaluations, Vartapetov stated that the fund crisis does not create any pressure on Türkiye’s credit rating at this stage.
Credit rating agency S&P left Türkiye’s BB- credit rating and “stable” outlook unchanged on October 16.
