Moody's upgrades Turkey's long-term debt rating

NEW YORK: Moody’s has raised Turkey’s long-term debt rating one notch, from B1 to Ba3, with a stable outlook, though it remains in speculative territory, the rating agency said.

Moody’s justified its decision Friday by citing effective economic policies that have helped restore investor confidence in the Turkish lira.

It also highlighted the central bank’s commitment to tight monetary policy that “durably eases inflationary pressures” and “reduces economic imbalances.”

Inflation continued to slow slightly last month in Turkey, reaching 35 percent year-on-year, according to official figures released in early July.

It had exceeded 75 percent in May 2024 year-on-year, before slowing month after month.

Moody’s said the government’s structural reforms — aimed at reducing energy dependence and boosting export competitiveness — could make the economy more resilient to external shocks.

But the agency warned that limited foreign exchange reserves still leave Turkey vulnerable to balance of payments shocks.

The Turkish central bank cut its key interest rate from 46 percent to 43 percent on Thursday, a slightly larger-than-expected reduction.

The institution began a series of rate cuts in December as inflation slowed, but on Thursday it predicted a temporary rebound in monthly inflation in July.

In the longer term, it expects inflation to ease to 24 percent by the end of this year and 12 percent by the end of 2026.