Fitch: Turkey’s Rating Unchanged, Outlook Revised to Stable

Fitch Ratings kept Turkey’s sovereign credit rating unchanged while revising its outlook to stable on Friday, citing easing of near-term external financing risks.

Fitch affirmed Turkey at BB-, three levels below investment grade and on par with Brazil and South Africa.

In a Feb. 2 report, Fitch said that while Turkey has taken steps to improve policy credibility, rebuilding depleted foreign-exchange reserves will take time. Turkey’s debt rating was downgraded by Fitch to BB- from BB in 2019, with the agency revising the outlook to negative from stable in August last year due to greater external financing risks.

Fitch forecasts the current account deficit to narrow to 2.9% in 2021 and 2.1% in 2022, from a high 5.3% of GDP in 2020, reflecting slower domestic demand and reduced gold imports. It expects inflation will decline to 11% at end-2021 and 9.2% at end-2022.


“The economy has likely maintained positive growth momentum despite the tightening of anti-pandemic measures, thus resulting in a full-year growth of 1.4% in 2020,” Fitch said. “We expect the economy to benefit from the vaccination drive and easing of restrictions domestically and abroad later in the year and forecast GDP growth of 4.7% in 2022.”

The new bank governor, Naci Agbal, has raised the policy rate by 675 basis points since his appointment on Nov. 7 and pledged a return to orthodox monetary policy.