Samp;P Global Ratings: Household confidence in the lira in Turkey remains resilient

According to the analysis published by S&P Global Ratings on the Turkish economy, the resilience of households' confidence in the Turkish lira and the decrease in foreign exchange demand enabled the Central Bank of the Republic of Turkey (CBRT) to partially rebuild its foreign exchange reserves.

In this context, while households' confidence in the Turkish lira maintained its resilient course throughout the year, as of September, the share of foreign currency deposits in total bank deposits remained unchanged compared to its level at the beginning of the year, at 38.7 percent.

On the other hand, according to S&P Global Ratings, the repercussions of the fund investigation that started in September and the liquidation of some investment funds were limited. Although forced asset sales led to a sharp correction in the stock market and the liquidation of approximately $18 billion of funds, the rapid liquidity provision of the CBRT and the discriminatory measures implemented in the regulatory framework prevented "financial contagion".

The fact that fund outflows were largely directed to bank deposits in Turkish lira rather than foreign currency indicates that this development did not trigger a broader loss of confidence in the Turkish lira.

According to the analysis, it is estimated that the energy price shock that emerged after the war in the Middle East may put upward pressure on inflation in Türkiye. In this context, inflation in Türkiye is expected to reach an average of 30.9 percent this year and 21.7 percent in 2027.

S&P Global Ratings' "stable" outlook for the Turkish economy reflects its assessment that the Turkish economy can weather the ongoing energy price shock, assuming authorities maintain tight monetary and wage-setting policies and do not further deplete foreign exchange reserves.

It is estimated that growth in the Turkish economy may be 3 percent this year, compared to 3.7 percent last year. Due to the war in the Middle East, the growth expectation for this year is 0.4 points below the institution's previous estimates. Economic growth is expected to accelerate again in 2027, reaching 3.7 percent.

While the budget deficit, which was 2.6 percent of the Gross Domestic Product (GDP) last year, is expected to expand to a limited extent this year and approach 3 percent, the ratio of public debt to GDP is expected to remain at low levels, remaining below 30 percent.

Source: TRT Haber Ekonomi RSS (Open Press / Translated Full Text)