The credit rating agency S&P Global made an inflation forecast for Turkey.

The international credit rating agency S&P Global Ratings has updated its assessments regarding the Turkish economy. The organization announced that it anticipates lower economic risks for Turkish banks due to the reduction of external imbalances in Turkey and improvements in economic indicators.

S&P Global stated in its announcement, "We have revised our economic risk trend from positive to stable, and our sectoral risk trend from stable to positive."

The statement highlighted that the tight monetary stance implemented by the Central Bank of the Republic of Turkey (CBRT) has contributed to reducing inflation and building reserves: Since June 2023, the CBRT has raised the policy interest rate from 8.5% to 50% and has taken a series of measures to limit credit growth. These policy changes have resulted in a slowdown in loans, a decrease in inflation, stability in the Turkish lira, and a rebalancing of external accounts. Additionally, the reduction in the current account deficit and the increase in reserves have been supporting factors for this improvement.

INFLATION WILL DECREASE GRADUALLY

S&P Global expressed that they expect inflation in Turkey to decrease gradually, predicting that inflation will be around 43% by the end of 2023 and will decline to about 25% by 2025.

However, S&P Global noted that the continuation of tight financing conditions would lead to a contraction in household spending. The organization stated that Turkey's economic growth will slow down, making the following assessments: Real GDP growth, which averaged 7.3% between 2021 and 2023, will decline to 2.3% in 2025. The Turkish lira will continue to depreciate in parallel with inflation. Additionally, we expect higher credit losses in the banking sector in 2024 and 2025.