Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the cases of sovereigns, sub-sovereigns and supranational organisations that may act as a lender of last resort.

Scope performs monitoring reviews to determine whether material changes and/or changes in macro-economic or financial-market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit rating’s performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). Scope announces the result of each monitoring review on its website and/or on its subscription platform ScopeOne.

Scope completed the monitoring review for the Republic of Türkiye (long-term local- and foreign-currency issuer and senior unsecured debt ratings: BB-/Stable; short-term local- and foreign-currency issuer ratings: S-3/Stable) on 23 May 2025.

This monitoring note does not constitute a credit-rating action, nor does it indicate the likelihood that Scope will conduct a credit-rating action in the short term. Information about the latest credit-rating action connected with this monitoring note along with the associated ratings history can be found on scoperatings.com.

Key rating factors

For the updated rating report accompanying this review, please see here.

Türkiye’s BB-/Stable credit ratings are supported by: i) a high potential growth rate of around 4% compared to sovereign peers; ii) a large and diversified economy; iii) a moderate government debt-to-GDP level of around 25%; and iv) a resilient banking system.

Türkiye’s credit ratings are challenged by: i) high inflation relative to the central-bank’s target and rating peers, underscoring continued risks on the disinflation process and the ongoing gradual economic rebalancing; ii) external sector vulnerabilities, reflected in large albeit declining gross financing needs, limiting resilience against external shocks; and iii) institutional challenges, elevated geopolitical risks and high regional instability.

Heightened political uncertainty triggered financial volatility and nominal depreciation of the lira (5% against USD in March-April 2025). The Central Bank of the Republic of Türkiye (CBRT) responded by raising its one-week repo rate (350 basis points) to 46.0% in April, reflecting enhanced credibility, independence, and effectiveness of the monetary policy. Inflation continued to decline in April and consumer inflation expectations remain well-anchored. However, inflation remains high (37.9% YoY in April) and is sensitive to lira depreciation through higher import prices, although the exchange rate pass-through appears more contained compared to other recent episodes of currency weakening.

Furthermore, the CBRT preserved financial stability by intervening massively on foreign currency markets. Its net assets, excluding foreign currency swaps with commercial banks, declined to less than USD 10bn in April 2025, from more than USD 40bn in January. The CBRT subsequently announced prudential measures to support the lira, among which the hike in reserve requirement ratios for foreign currency deposits. Despite high exchange rate volatility, a narrower current account deficit (0.8% of GDP in 2024, down from 3.5% in 2023), driven by lower imports (energy, gold) and strong tourism receipts, could support the gradual replenishment of international reserves.

External and financial stability risks remain significant due to high external financing needs, foreign capital outflows, and high dollarisation of the economy. Domestic challenges are compounded by geopolitical tensions and regional instability. Scope’s baseline is that the authorities will remain committed to the current macro-economic policy mix to mitigate economic and financial implications of heightened uncertainties, even though policy reversals are a downside risk. On that basis, monetary policy decisions and the evolution of international reserves will be key to inform Türkiye’s rating trajectory.

Real GDP growth is projected at 3.0% in 2025 and 3.2% in 2026 as global and domestic uncertainties, as well as inflationary pressure and restrictive monetary policy, weigh on investor sentiment and consumer demand. However, internal demand could be supported by a more gradual-than-expected fiscal tightening. The general government deficit is projected to decline to 4.0% of GDP in 2025, from 5.2% in 2024, and 3.6% in 2026. The authorities are committed to maintain fiscal discipline, including through the revenue and expenditure policies and measures outlined in the Medium Term Program, such as increasing tax collection performance by reducing informality, removing inefficient tax exceptions, exemptions and discounts, as well as introducing a minimum corporate tax. The general government debt level is projected to remain lower than peers, around 25-27% of GDP by 2030.

The Stable Outlook reflects Scope’s view that risks to the ratings are balanced over the next 12 to 18 months.

Upside scenarios for the ratings and Outlooks are (individually or collectively):

1. Strengthened inflation outlook, based on enhanced credibility, independence, and effectiveness of the central bank;
    
2. Stronger fiscal outlook, raising confidence in the capacity to reach and maintain a primary surplus;
    
3. Higher international reserves, based on lower external gross financing needs and higher foreign capital inflows.

Downside scenarios for the ratings and Outlooks are (individually or collectively):

1. A sharp economic slowdown or an external shock, threatening disinflation;
    
2. Declining international reserves, weakening external resilience and increasing financial stability risks;
    
3. Severe domestic political pressure, acute deterioration in security conditions and international relations.

The methodology applicable for the reviewed ratings and/or rating Outlooks (Sovereign Rating Methodology, 27 January 2025) is available on scoperatings.com/governance-and-policies/rating-governance/methodologies.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Thomas Gillet, Director

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