The US-based international credit rating agency Moody's, which used praising words in its annual analysis of the Turkish economy, made a critical decision for Turkish banks. Moody's changed the outlook for Turkish banks from negative to stable, Bloomberg reported.
The operating environment for Turkish banks remains challenging and volatile due to the expected slowdown in economic growth and persistently high inflation, Moody's said in its assessment, adding that the government's first steps towards returning to orthodox policies following the elections in May 2023 have supported operating conditions for Turkish banks.
Moody's assessment is that too high inflation, higher taxes, and further deterioration in the value of the Turkish lira will put pressure on consumer spending and weaken borrowers' repayment capacity, putting banks' asset quality under pressure.
Moody's stated that the depreciation of the Turkish lira and the expansion in loan volume will challenge the sector's capital adequacy during the outlook period, albeit at a slower pace compared to 2022, and that profitability will normalize compared to the peaks recorded in 2022, but will still remain strong.
In its assessment, Moody's stated that banks' external funding position and dollarization levels have improved and that they expect liquidity, especially in foreign currency, to remain adequate.
In its annual analysis of the Turkish economy published last week, the US-based international credit rating agency Moody's praised the recent policy actions.
"If the transition to orthodox policies is sustained and leads to a steady reduction in macro imbalances, the outlook could turn positive and the rating could be upgraded," the analysis noted, adding that Türkiye's economic outlook is stable and reflects balanced risks.
Turkish Treasury and Finance Minister Mehmet Şimşek said after Moody's report that they believed that implementing policies in line with international norms would reflect positively on the credit rating.