Rating action

Scope Ratings GmbH (Scope) has today affirmed Türkiye's long-term local- and foreign-currency issuer and senior unsecured debt ratings at BB-, with Stable Outlooks. The short-term issuer ratings have been affirmed at S-3 in foreign- and local-currency, with Stable Outlooks.

Türkiye’s BB- long-term ratings are supported by: i) a record of recent effective monetary tightening and inflation-targeting; ii) enhanced macroeconomic stability and a moderate GDP growth outlook mitigating external imbalances; iii) a record of fiscal discipline anchoring moderate government debt-to-GDP; and iv) a resilient banking system.

However, Türkiye’s long-term ratings are challenged by: i) high inflation relative to the central bank’s target underscoring continued risks to the disinflation process; ii) high sensitivity of the local currency and international reserves to domestic and external developments; iii) lower, albeit still high credit growth and dollarisation; and iv) domestic political uncertainties and elevated geopolitical risks.

For the updated report accompanying this review, click here.

Key rating drivers

A record of recent effective monetary tightening and inflation-targeting. Türkiye’s inflation has steadily declined between June 2024 and August 2025 thanks to the sustained inflation-targeting that followed the monetary policy pivot of June 2023. The latest inflation rate (33.3% YoY in September, after 33.0% in August) suggests that disinflation could be more gradual than expected due to higher services and food prices. Scope projects average inflation at 35% in 2025, down from 58.5% in 2024, and 25% in 2026. These projections imply higher inflation levels than the Central Bank of the Republic of Türkiye’s (CBRT) year-end targets, which have been revised upward to 24% for 2025 and 16% for 2026¹.

Scope expects the CBRT to adequately adjust its monetary policy should the recent uptick in inflation be sustained. In August 2025, the central bank introduced explicit year-end interim targets to provide guidance on disinflation². Although potential deviations from pre-announced targets could question policy effectiveness, interim targets reflect the CBRT’s commitment to inflation-targeting. Scope anticipates a moderation in policy rate cuts, with the 1-week repo rate projected to decline from 39.5% currently to 38.5% by end-2025 and 33.5% by end-2026.

Enhanced macroeconomic stability given a moderate GDP growth outlook mitigating external imbalances. The continuation of the current monetary policy stance could further support gradual economic rebalancing through lower private consumption, strengthening macroeconomic stability and sustainability. Scope projects a real GDP growth rate of 3.3% in 2025, 3.5% in 2026 and 3.7% in 2028, which is lower than Türkiye’s long-term growth average of 5.9% over 2010-19. Growth projections have been revised down under the Medium-Term Programme 2026-28³, although the authorities still target a 5% growth rate in 2028. Türkiye’s GDP growth outlook and potential compare favourably against credit rating peers thanks to its large and diversified economy as well as its favourable demographic outlook.

The moderate economic slowdown reduces Türkiye’s external imbalances and reliance on foreign capital inflows. If the current policy stance is sustained, the decline in the current account deficit, to 1.4% of GDP in 2025 and 1.3% in 2026⁴, and gross external debt, to 37% of GDP in Q2 2025, are projected to lower external gross financing needs, from 19% of GDP in 2024 to 14% on average over 2025-28. Sustained inflation-targeting in the absence of shocks should improve investor sentiment and portfolio investment, further supporting the improvement of CBRT’s net foreign assets (USD 44bn in August 2025 excluding foreign currency swaps) and of the net international investment position (-22.7% in Q2 2025).

A record of fiscal discipline anchors moderate government debt-to-GDP. Under the updated Medium-Term Programme, the general government primary balance is projected to improve from a deficit of 1.7% of GDP in 2024 to a surplus of 0.3% of GDP in 2025 and to 0.9% by 2028 thanks to contained non-interest spending, including earthquake-related expenditures, and robust tax collection. The government recently introduced a draft bill in parliament to increase non-tax revenue sources, including by removing tax exemptions.

Scope projects a primary deficit of 0.4% of GDP on average between 2025 and 2030 based on a record of and commitment to fiscal discipline. The headline deficit is projected at 3.4% of GDP over the period due to the steady increase in net interest payments, from 7% of revenue in 2024 (2% of GDP) to 10% on average by 2030 (3%), based on higher-for-longer rates on domestic and international markets. General government debt is projected to stabilise at around 25% of GDP on average between 2025 and 2030, although higher than expected debt-servicing-costs and a sharp depreciation of the lira could weigh on the debt trajectory (more than half of government debt is denominated in foreign currency)⁵.

Credit rating challenges: high inflation; external and financial sector vulnerabilities; domestic political uncertainties and elevated geopolitical risks

Türkiye’s inflation rate remains meaningfully higher than the CBRT’s 5% target over the medium-term and credit rating peers. Further entrenching disinflation is expected to require higher-for-longer policy rates due to fading base effects, high inflation expectations and exchange rate volatility. In an adverse scenario, a potential macroeconomic shock and/or policy reversal could challenge policy effectiveness and threaten the disinflation path.

Furthermore, the lira and international reserves are highly sensitive to heightened global tensions, high regional uncertainties and domestic political developments, especially ahead of general elections planned by May 2028. Large interventions of the CBRT on foreign currency markets in response to the sharp depreciation of the lira, as observed in March-April 2025, raise uncertainty on the sustained replenishment of international reserves.

Finally, lower, albeit still high credit growth and dollarisation highlight lingering financial vulnerabilities. Dynamic credit growth, especially for consumer loans, poses risk to disinflation and gradual economic rebalancing, while the steady deterioration of the net foreign-currency position of non-financial corporates⁶ raises concerns over the private sector’s shock absorption capacity.

Rating-change drivers

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. Reduction of macro-economic imbalances, particularly a significant and sustained decline in the inflation rate;
    
2. Stronger external resilience, based on lower external financing needs and improving international reserves adequacy; and/or
    
3. Resilient fiscal outlook including improved debt-servicing-costs.

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; and/or
    
3. Severe domestic political instability, acute deterioration in security conditions and international relations.

Sovereign Quantitative Model (SQM) and Qualitative Scorecard (QS)

Scope’s SQM, which assesses core sovereign credit fundamentals, signals a first indicative credit rating of ‘bbb+’ for Türkiye. Under Scope’s methodology, the indicative rating receives 1) no positive adjustment from the methodological reserve-currency adjustment; and 2) two-notch negative adjustment from the methodological political-risk quantitative adjustment. On this basis, a final SQM quantitative rating of ‘bbb-’ is reviewed by the Qualitative Scorecard (QS) and can be changed by up to three notches depending on the size of Türkiye’s qualitative credit strengths or weaknesses compared against a peer group of sovereign states.

Scope has not identified QS relative credit strength for Türkiye. Conversely, the following credit weaknesses have been identified in the QS: i) macro-economic stability and sustainability; ii) debt profile and market access; iii) current account resilience; iv) external debt structure; v) resilience to short-term external shocks; vi) financial sector oversight and governance; vii) financial imbalances; viii) environmental factors; and ix) governance factors.

Combined relative credit strengths and weaknesses generate a three-notch negative adjustment via the QS and signal BB- long-term ratings for Türkiye.

A rating committee has discussed and confirmed these results.

Factoring of environment, social and governance (ESG)

Scope explicitly factors in ESG issues in its ratings process via the sovereign-rating methodology’s stand-alone ESG sovereign-risk pillar, which holds a significant 25% weight under the quantitative model (SQM) and 20% weight under the methodology’s qualitative overlay (QS).

Environmental factors are explicitly considered in the ratings process via an environment sub-category of the ESG sovereign risk pillar. Türkiye’s exposure to natural disasters is considered high as the country is exposed to earthquakes and landslides. Although Türkiye issued its first green bond in April 2023 and plans to double wind and solar energy capacity by 2035, the country faces deep challenges on natural resources protection and climate change mitigation, for instance to reduce power generation through coal plants. This drives Scope’s ‘weak’ qualitative assessment relative to sovereign peers.

Socially related factors are captured under the sovereign methodology in the SQM via accounting for the economy’s comparatively low rate of labour force participation and a comparatively high level of income inequality. Although the unemployment rate is high, the old-age dependency ratio compares favourably against that of indicative peers, and demographic growth is positive. Together with the reduction of absolute poverty and the improvement of education, this supports Scope’s ‘neutral’ qualitative assessment.

Under governance-related factors, Türkiye scores weakly relative to rating peers according to the World Bank’s Worldwide Governance Indicators under the SQM. Performance on the rule of law, control of corruption, regulatory quality, and government effectiveness have declined over the last decade. Heightened global tensions, high regional uncertainties and domestic political developments cloud the outlook ahead of general elections planned by May 2028. This supports Scope’s ‘weak’ qualitative assessment.

Rating Committee
The main points discussed by the rating committee were: i) domestic economic risk; ii) public finance risk; iii) external economic risk; iv) financial stability risk; v) ESG-related risk; and vi) rating peers.

Rating driver references
1. CBRT, Inflation report, August 2025
2. CBRT, Monetary policy and inflation outlook, September 2025
3. Presidency of Strategy and Budget, Medium-term programme 2026-28, September 2025
4. Ministry of Treasury and Finance, Turkish economy, October 2025
5. Ministry of Treasury and Finance, Public debt management report, September 2025
6. CBRT, Foreign Exchange Assets and Liabilities of Non-Financial Companies, August 2025

Methodology
The methodology used for these Credit Ratings and/or Outlooks, (Sovereign Rating Methodology, 27 January 2025), is available on scoperatings.com/governance-and-policies/rating-governance/methodologies.
The model used for these Credit Ratings and/or Outlooks is (Sovereign Quantitative Model Version 4.1), available in Scope Ratings’ list of models, published under scoperatings.com/governance-and-policies/rating-governance/methodologies.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions – Credit Ratings, Ancillary and Other Services’, published on scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at scoperatings.com/governance-and-policies/regulatory/eu-regulation. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): registers.esma.europa.eu/cerep-publication/. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on scoperatings.com/governance-and-policies/rating-governance/methodologies.
The Outlook indicates the most likely direction of the Credit Ratings if the Credit Ratings were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The Credit Ratings were not requested by the Rated Entity or its Related Third Parties. The Credit Rating process was conducted:
With Rated Entity or Related Third Party participation      NO
With access to internal documents                                   NO
With access to management                                            NO
The following substantially material sources of information were used to prepare the Credit Ratings: public domain.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting these Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and/or Outlooks and the principal grounds on which the Credit Ratings and/or Outlooks are based. Following that review, the Credit Ratings and/or Outlooks were not amended before being issued.

Regulatory disclosures
These Credit Ratings and/or Outlooks are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and/or Outlooks are UK-endorsed.
Lead analyst: Thomas Gillet, Director
Person responsible for approval of the Credit Ratings: Alvise Lennkh-Yunus, Managing Director
The Credit Ratings/Outlooks were first released by Scope Ratings in January 2003. The Credit Ratings/Outlooks were last updated on 6 December 2024.

Potential conflicts
See scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties.

Conditions of use / exclusion of liability
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