Standard & Poor's has downgraded its outlook on Türkiye from positive to stable, while keeping the country's long-term foreign currency sovereign credit rating at BB- and short-term foreign currency rating at B. Local currency ratings were held at BB long-term and B short-term.
The ratings agency cited worsening economic conditions as the reason for the shift. Persistent volatility in Türkiye's financial markets and rising inflation prompted the Central Bank of Türkiye to increase benchmark interest rates by 400 basis points beginning in early June 2006. Credit analyst Farouk Soussa noted the hikes should steady the lira but will weigh on consumer demand and trim government revenue, especially from indirect taxes.
S&P acknowledged several stabilizing factors at the BB- level, including the government's adherence to sound macroeconomic policies and measurable progress on structural reforms. Tax, social security, and banking reforms have advanced, and Türkiye passed its third and fourth IMF standby reviews in May 2006.
Those gains are now offset by mounting risks. Banks face higher costs for external credit and exposure to interest-rate swings in treasury operations. The public sector must manage market confidence as election-related spending pressures build ahead of 2007 presidential and parliamentary votes, while EU accession talks remain stalled.
Historical summary. TurkishPress restated this wire report, first published in June 2006, in its own words.