S&P holds Türkiye rating, eyes disinflation for upgrade

Rating held on stable outlook

S&P Global maintained Türkiye's sovereign credit rating at "BB-/B" with a stable outlook in its April assessment, skipping a scheduled rating decision while publishing a detailed analysis, Karen Vartapetov told Anadolu. The lead analyst for Central and Eastern Europe said faster disinflation and stronger reserves could trigger an upgrade if household confidence in the lira persists, noting that not publishing a rating assessment does not imply sudden changes. "The upside pressure we mention, and we've been mentioning them for some time, is continued disinflation -- progress in lowering inflation, probably to single digits (which may be) too ambitious, but lower teens," she said.

Inflation trajectory and external risks

The agency projects annual inflation will average 30.9% this year before easing to 21.7% in 2027, though Vartapetov warned that the external environment remains challenging amid volatile global commodity markets and tightening policies by major central banks. She noted that while headline inflation is expected to climb roughly seven percentage points due to the Middle East war's energy price shock, second-round effects have proven relatively contained as domestic demand softens and firms find it harder to pass costs to consumers. "It is more difficult for firms to pass on higher prices to consumers, and that's why I think the policy mix and or the monetary policy stance is kind of finally making its way through to the economy," she said.

Policy stance and financial stability

The Central Bank of the Republic of Türkiye (CBRT) is expected to maintain its policy rate at a minimum of 35% through year-end unless energy prices stabilize, with cuts anticipated only in 2026, Vartapetov said. Regarding recent investment fund liquidations, she noted that the process has yet to trigger a broader financial crisis or undermine confidence in the Turkish lira, as capital exiting those assets has largely flocked to lira-denominated bank deposits rather than fleeing the currency. "We need to see how the government responds to unresolved fund liquidations, to compensation the investors, and so on, and whether investor confidence could finally be hit at some point," she said.

S&P Global forecasts the Turkish economy will expand 3% in 2026 before accelerating to 3.7% growth in 2027, slightly tempering expectations due to ongoing regional conflicts. Vartapetov noted that tangible progress has been made in core inflation, though fully anchoring expectations will require additional time as monetary policy works to encourage households to hold savings in lira — rather than foreign currency — and the central bank navigates a difficult external environment.