Moody's: Turkey's credit rating may increase if orthodox policies continue

Moody's stated in its report on Turkey that the implemented economic policies are positive for the credit outlook, but there is also a risk of a new policy reversal. International credit rating agency Moody's assessed that the new economic management's transition to a more orthodox, rule-based and predictable policy is positive for the credit outlook. However, it was also emphasized that there is a risk of a new policy change if the implemented policies slow the economy down faster than acceptable levels. The agency warned that the credit outlook could turn negative in such a case. Moody's stated that Turkey's credit profile has recently been suppressed due to unpredictable policies resulting in high inflation. It was emphasized that the lack of Central Bank credibility and investor confidence also had a negative impact on the credit outlook. On the other hand, the report underlined the steps taken by the new government after the elections with the promise of a return to orthodox policies. Growth will slow The report stated that the policy change implemented by the new economic management will lead to slower growth, and said, "The main challenge for the new economic team will be to provide the balance between eliminating imbalances in the economy and maintaining growth." The agency expects the slow and gradual tightening of monetary policy to continue, also taking into account the local elections to be held next year, and predicted that inflation will remain at high levels in the coming months. There is a risk of policy reversal Moody's currently keeps Turkey's credit outlook stable. The report states that the stable outlook reflects balanced risks. The agency stated that if the transition towards traditional policies continues, this will positively affect the credit outlook and rating, while also underlining that the risk of a new policy reversal is quite high. The agency stated that in such a case, the credit outlook will turn negative. Moody's stated that there may be possible errors in the removal of macroprudential measures and stated that this area has been managed well so far.