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Fitch upgrades Turkey’s outlook to ‘stable’  

Istanbul Turkish tourism Mert Kahveci/Unsplash

Global ratings agency Fitch on Friday upgraded Turkey’s foreign currency outlook to “stable” and affirmed its rating at “B,” saying its change in economic policy could reduce financial instability in the near term.

Turkey has been struggling with inflation for a while and is now at the heels of a policy U-turn after President Tayyip Erdogan brought in a new finance minister and central bank head who have raised interest rates to 25 percent from 8.5 percent.

The country sees more rate hikes incoming. JPMorgan also doubled its forecasts for the coming months, predicting that fiscal spending plans and higher inflation would push up rates by another 10 percentage points over the next two central bank meetings.

The Fitch report also flags uncertainty regarding the success of the policy adjustment.

Turkey on Wednesday outlined its medium-term economic plan, which it expects will lower annual inflation to 33 percent in 2024 from 65 percent in 2023. The country also trimmed GDP forecasts, with economic slowness seen towards year-end, ahead of nationwide municipal elections set for March next year.

Fitch in March affirmed Turkey at a ‘B’ rating with a negative outlook, while S&P in March moved the country to a negative outlook on economic policy concerns.