Istanbul Stock Exchange Closes Lower in Anticipation of Crucial Credit Ratings by Moody's and Fitch
In a positive development for Turkey's economy, the country's current account deficit showed signs of recovery in May, with the annualized gap narrowing to $16 billion. This marks a significant improvement from the $19 billion deficit recorded in 2024.
The trading volume on Friday was ₺83.23 billion ($2.05 billion), although the BIST 100 ended the day down 0.4%. Despite this decline, the index managed to end the week with a net gain of 2.4%. The banking index slipped by 0.25% on Friday.
Conditions improved in May, with reserves rebounding by $13.5 billion. Excluding foreign exchange swap agreements, net reserves rose to $44.3 billion, up from the year's low of $13.8 billion in early May.
The gains on Thursday were driven by a 300 basis point reduction in the central bank's benchmark interest rate, which led to a surge in the daily trading volume to ₺139 billion ($3.43 billion). On Thursday, the BIST 100 had climbed 0.92% to close at 10,689.05 points.
Despite the ups and downs, Turkey's economy has received a boost from improved credit ratings. As of July 2025, Turkey's current credit ratings and outlooks from the three major agencies are:
- Moody's: Upgraded Turkey's long-term foreign currency credit rating to Ba3 (three notches below investment grade) with a stable outlook, revised from B1 with a positive outlook earlier.
- Fitch Ratings: Affirms Turkey’s rating at BB- (three notches below investment grade) with a stable outlook.
- S&P Global Ratings: Affirms Turkey’s rating at BB- (three notches below investment grade) with a stable outlook.
All three agencies are now aligned at the same rating level, at Ba3/BB-/BB- with stable outlooks, after a series of upgrades in 2023 and 2024 due to Turkey's return to orthodox economic policies and improvements in inflation and economic stability.
Fitch upgraded Turkey's rating from B+ to BB in February 2025 and maintains a "Stable" outlook. Moody's last raised Turkey's credit rating in July 2024 from B3 to B1 with a "Positive" outlook. In 2024, Turkey was the only country to receive credit rating upgrades from all three major rating agencies.
The central bank's ability to manage market volatility stemming from domestic political uncertainties and global trade disruptions was noted by Fitch in an April report. Fitch also highlighted Turkey's strong reserves and improving current account position in the same report.
However, it's important to note that Turkey still faces ongoing political and external risks. Moody's and Fitch are scheduled to publish credit updates for Turkey on Friday, July 25.
In April, the central bank recorded a $25 billion reserve loss, the largest on record, due to interventions aimed at stabilizing the Turkish lira. Despite this setback, Turkey's economy appears to be on a path towards recovery, with improvements in the current account deficit and credit ratings providing a positive outlook for the future.
[1] Moody's Investors Service, "Turkey: Upgrade to B1 from B3; Outlook Positive," July 2024. [2] Fitch Ratings, "Turkey: Upgrade to BB from B+; Outlook Stable," February 2025. [3] S&P Global Ratings, "Turkey: Affirms BB-; Outlook Stable," [Date of announcement not provided]. [4] Reuters, "Turkey's current account deficit narrows in May," [Date of announcement not provided].
The central bank's efforts to stabilize the Turkish lira resulted in a $25 billion reserve loss in April, yet overall, Turkey's economy seems to be on a path of recovery. In May, the current account deficit showed signs of recovery, with the annualized gap narrowing to $16 billion, a significant improvement from the $19 billion deficit recorded in 2024. Istanbul's finance sector is expected to benefit from this positive development and the country's improved credit ratings.
