In a move that signals growing confidence in Turkey's economic trajectory, Japan's Rating and Investment Information (R&I) has revised the country's credit outlook from "negative" to "stable." This shift acknowledges the Turkish government's successful efforts to maintain fiscal discipline, combat inflation, and promote macroeconomic stability even as the global economic landscape remains uncertain.
Factors Behind the Upgrade
Several factors underpin R&I's positive assessment:
Strong Growth Potential: Turkey's youthful population and robust economy position it for continued growth, even amidst global headwinds.
Fiscal Responsibility: The government's commitment to prudent fiscal policies has improved the fiscal balance and demonstrates a focus on sustainable growth.
Tighter Monetary Policy: The Central Bank's tight monetary stance has curbed inflation, a key step in achieving macroeconomic stability.
Improved External Position: A narrower current account deficit and increasing foreign exchange reserves point to a recovering external sector.
Moderating Growth, Continued Challenges
While Turkey experienced impressive 5.1% growth in 2023, a slowdown is expected in 2024 due to tighter monetary policy and subdued domestic demand. However, exports are projected to rise with the recovery in Europe. Forecasts from both the Turkish government and the IMF anticipate growth around 3.4-3.5% for 2024.
Challenges persist, including elevated inflation, the need for post-earthquake reconstruction, and external vulnerabilities. However, the government's proactive measures, including further fiscal deficit reduction and debt management, are seen as positive steps.
A Positive Step Forward
R&I's upgrade of Turkey's credit outlook highlights the country's progress toward economic stability. Though challenges remain, the government's focus on fiscal discipline, inflation control, and sustainable growth paints a promising picture for Turkey's economic future.
