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## Standard & Poor's Upgrades Turkey's Credit Rating to 'BB-'

The Turkish Treasury and Finance Minister, Mehmet Şimşek, has announced that Turkey has become the only country to have its credit rating raised by two notches within a year by all three major international credit rating agencies: Moody's, Standard & Poor's, and Fitch.

Şimşek, in a statement on X (formerly Twitter),commented on Standard & Poor's decision to upgrade Turkey's credit rating from 'B+' to 'BB-', attributing the increase to several factors, including:

• Economic stability
• Turkish Lira stability
• Reduced current account deficit
• Reduced need for external financing
• Enhanced central bank reserves
• Deceleration of inflation

He emphasized that the positive developments achieved through the government's economic program have resulted in a reduction of Turkey's risk premium and significant improvements in external borrowing costs.

Şimşek also pointed out that market indicators suggest an even higher credit rating for Turkey, hinting at continued positive developments in the future.

## Standard & Poor's Highlights Positive Economic Developments

In its announcement, Standard & Poor's cited Turkey's ample reserves and declining inflation due to the central bank's tightening of its monetary policy as contributing factors to the rating upgrade.

The agency revised its outlook for the Turkish economy from 'positive' to 'stable', reflecting the balanced risks posed by the government's ambitious plans to reduce high inflation, manage wage expectations, and achieve economic rebalancing.

## Inflation Remains a Concern Despite Positive Economic Indicators

While the credit rating upgrade indicates positive economic progress, Turkey continues to grapple with elevated inflation rates. In Istanbul, Turkey's largest city, consumer price inflation rose by 59.10% year-on-year in October, according to data released by the Istanbul Chamber of Commerce.

The Istanbul Living Cost Index, a gauge of retail price movements, climbed by 3.64% in October, resulting in an annual inflation rate of 59.10%. Monthly inflation in September stood at 3.9%, and year-on-year inflation reached 59.18% during the same period.

Meanwhile, the wholesale price index, which reflects wholesale price movements, increased by 0.15% monthly and 43.07% annually.

Compared to September, retail prices saw a 11.43% increase in clothing expenses, a 4.17% rise in healthcare and personal care expenditures, a 4.06% surge in housing costs, and a 3.40% increase in food expenses. Prices also climbed by 1.38% in household goods, culture, education, and leisure expenses.

## Continued Decline in Trade Deficit

Despite the ongoing challenges of inflation, Turkey has witnessed a sustained decline in its foreign trade deficit. Şimşek stated that exports increased by 3.6% year-on-year in October, while imports contracted for the sixth consecutive month. As a result, the annual trade deficit improved by $35.1 billion compared to the same period last year, reaching $77.7 billion.

Şimşek expressed optimism that the trade deficit will perform better than projected in the medium-term economic program for 2024. He further highlighted the government's commitment to enhancing Turkey's share in global trade through a dual transformation process, boosting value-added production, and achieving higher positions in supply chains.