TURKEY: UniCredit Expect Moody’s to Upgrade Turkey’s Credit Rating to B2

As a reminder, Moody’s may update Turkey’s sovereign credit ratings after hours today (Current Rating: B3; Outlook: positive).

• UniCredit expect Moody’s to upgrade its sovereign credit rating for Turkey to B2 and to keep its positive outlook. Since Moody’s upgraded the outlook to positive in January, the central bank has tightened its policy further and while the needed slowdown in domestic demand and improvement in underlying inflation were delayed due to expansionary policies ahead of local elections, recent data have signalled that adjustment is underway on these fronts.
• Moreover, the current-account deficit continued to narrow and the CBRT’s gross reserves have increased by USD 25bn since end-1Q24, while its net FX position improved by about USD 85bn in the same period, as foreign and local investors favoured Turkish financial assets.
• UniCredit expect to see additional rating upgrades from credit-rating agencies as Turkey’s macroeconomic imbalances are likely to improve further, especially in terms of flow data, with the help of more-prudent policy.