Continued stability for the Turkish economy
Türkiye’s veteran economy minister Mr Simsek retook the helm in Q3 2023 and has launched a “Medium Term Plan” on the three main pillars of Macro-financial Stability, Disinflation and Structural Reform. On the monetary policy front, in strong harmony with the ministry, the Central Bank of Türkiye has delivered several significant policy rate hikes to combat inflation (from 8.5% in May to 35% in October). These measures, combined with the demonstrated full control of all aspects of the economy and strong and credible messaging through well-executed roadshows, have started to yield results on the country’s credit outlook.
The Turkish CDS, which had surpassed 750bps in 2022, has gradually gone down to a reasonable 348bps range as of November 2023.
The offshoots of Simsek’s programme can also be seen at the Current Account Deficit front, which has entered a sharp decline phase as of Q3 2023. It is expected that the sharp reduction in the Turkish CAD will ease in Q2 2024 but will sharpen again and likely turn into surplus following the March 2024 local elections.
Barring adverse geopolitical developments, we expect the positive trend in the Turkish credit outlook to continue throughout 2024. The unwavering implementation of the credible economic programme and the re-establishment of investor trust are without a doubt the two key elements of continued success for Turkish economy management.