Policy change is a clear credit positive: Moody’s

Strengthening of TRY and changes in monetary policies enabling capital inflows are positive factors in terms of Turkey’s credit rating, according to the international credit rating agency Moody’s.

“The change in monetary policy since November is a clear credit positive, leading to a stronger currency, renewed capital inflows and decline in foreign exchange rates,” Moody’s said.

“However, domestic confidence hasn’t yet been fully restored, as it can be seen from ongoing high dollarization”, international credit rating agency added, stressing that preservation of the more consistent policy framework should be observed.

However, a positive outlook or an upgrade is highly unlikely, considering Turkey’s negative outlook, according to Moody’s. “The rating outlook can be balanced to stable if the recent shift to more consistent fiscal and monetary policies are permanent, which redounds on decline in dollarization,” Moody’s said, stressing that a continued reduction in tensions with the U.S. and EU will be positive for Turkey.

“The strong growth in 2020 stemmed from powerful credit expansion which is significantly unsustainable, and this contributed to the high inflation,” the international credit agency said regarding its evaluation on Turkish economy’s growth outlook.

Even though there will be a stronger global growth and visits of foreign tourists to come by summer months will provide some support to the Turkish economy, there are other factors to moderate the growth including more modest credit growth and high interests, according to Moody’s.

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