Fitch Ratings highlighted the improvement in Turkey's foreign exchange reserves.

Important Statements from Fitch Ratings

Fitch Ratings held the "Fitch Turkey Event" in Istanbul, featuring senior analysts from the "Sovereigns," "Corporates," "Financial Institutions," and "Sustainable Finance" divisions. Douglas Winslow, a Fitch analyst, emphasized that Turkey's foreign exchange reserves and external financing situation played a critical role in last year's rating upgrades.

Significant Improvement in Foreign Exchange Reserves

Winslow stated that foreign exchange reserves have risen to 180 billion dollars, compared to 100 billion dollars in 2023, noting, "The quality of the reserves has also improved significantly. Excluding swap transactions with domestic banks and looking at a broader measure, we observe a rapid increase in foreign exchange reserves."

Optimistic Forecasts for the Future

Praising the pace of reserve increase, Winslow mentioned that this growth is expected to continue over the next two years, albeit at a slower rate. He also highlighted Turkey's external financing needs, stating, "This is a risk, but banks and companies are able to roll over their foreign debt even in stressful periods. This indicates that the flow of external financing is stable."

Fitch's External Financing Assumptions

Regarding Fitch's assumptions on external financing for Turkey, Winslow noted that they expect some additional capital inflow, but the current account deficit may show a slight increase. He also added that they do not anticipate a significant decrease in the dollarization rate.

Policy Risks and Rating Outlook

Winslow pointed out that the biggest risk could be an overly loose monetary policy, expressing that Fitch's ratings have a medium-term perspective. "Last year, we upgraded Turkey's rating twice, bringing it to pre-crisis levels at BB-," he stated.

Finally, Winslow mentioned that they have a strong belief that current policies will be maintained, adding that the real policy interest rate is still expected to remain positive next year, projected to be around 3%.