Home Ratings and Research Archive ACRA Europe downgrades unsolicited credit ratings of Turkey to B+, outlook Stable
ACRA Europe downgrades unsolicited credit ratings of Turkey to B+, outlook Stable
Friday, 10 January 2020

The Republic of Turkey (hereinafter, Turkey, or the country) has been assigned the following ratings:

  • Long-term foreign currency credit rating at B+ and local currency credit rating at B+;
  • Short-term foreign currency credit rating at B and local currency credit rating at B.

The outlook on the long-term foreign currency credit rating is Stable and local currency credit rating is Stable.

The Stable outlook assumes that the rating will most likely stay unchanged within the 12 to 18-month horizon.

The long-term credit rating of the country has been downgraded to B+ from BB. The downgrade reflects material changes in ACRA Europe’s sovereign methodology, namely a revised approach to assessing the institutional framework and a set of newly introduced indicators, both of which better reflect the risk of sovereign default, in ACRA Europe’s view.

Credit rating rationale

Positive rating assessment factors
  • Relatively low general government debt load.
  • Strong diversification of the economy.
  • Good medium and long-term economic growth prospects.
Negative rating assessment factors
  • Low credibility of the monetary policy demonstrated by high inflation.
  • High share of FX government debt.
  • Moderate contingent liabilities of both the financial and non-financial sectors.
  • Low reserve coverage ratios.
  • Weak institutional framework.
Stable outlook
  • The Stable outlook assumes that the rating will most likely stay unchanged within the 12 to 18-month horizon.
Potential rating upgrade factors
  • Strengthening of the central bank’s credibility.
  • Rebuilding of FX reserve buffers.
  • Substantial decline in the FX share of public debt.
  • Material increase in governance indicators.
Potential rating downgrade factors
  • Substantial increase in the public debt to GDP ratio.
  • Persistent subdued growth following the currency crisis.
  • Further strong depreciation of the lira.
  • Large scale materialization of the contingent liabilities.

Sovereign model results (based on 2019 estimates)

Block Indicative credit rating for the block Modifier Score Modifier corrections to the indicative credit rating Final credit rating for the block
Macroeconomic position BB+ Potential economic growth 0 -1 BB
Sustainability of economic growth 0
Efficacy of structural, economic and monetary policies -1
Public finance BBB- Contingent liabilities and risk of them materializing on the sovereign’s balance sheet -1 -2 BB
Fiscal policy framework and fiscal flexibility 0
Market access and sources of funding -2
Debt sustainability 0
External position B+ Balance of payment vulnerabilities 0 -1 B
External debt sustainability -2
Stability of currency regime n/a
Institutional framework B- Willingness to pay 0 0 B-
History of defaults 0
Political instability and recent political decisions 0
Involvement in geopolitical conflicts, exposure to geopolitical risks 0

Assigned credit rating

Indicative credit rating BB
Modifier corrections to the indicative credit rating -2
Final credit rating B+
Assigned credit rating B+


Turkey has the 19th largest economy in the world, with a strong manufacturing sector.

Turkey is a large emerging economy with a GDP per capita of 28,000 dollars in 2018 (expressed in purchasing power parity standards). In nominal terms, Turkey’s economy was the 19th largest in the world with GDP at 771 bln USD. The economy is relatively well diversified, with manufacturing playing an important role. In 2018, the gross value added in manufacturing accounted for 19% of GDP (the global average is around 15.5%). The openness of the economy is moderate with exports accounting for almost 30% of GDP in 2018. Exports are well diversified in terms of partners — in 2018, the three largest trading partners were Germany (9.6% of merchandise exports), the United Kingdom (6.6%), and Italy (5.7%). In terms of products, the export structure is somewhat skewed towards the automotive industry, with a 15.5% share in merchandise exports.

Figure 1. Export and manufacturing dependence of Turkey and its peers


Source: World Bank, 2018

The economy is recovering from a currency crisis following years of robust growth financed by external borrowing.

The Turkish economy is currently recovering from a currency crisis coupled with a recession, which was caused by high external imbalances and the low credibility of monetary policy. Prior to 2018, growth was to a significant extent supported by foreign borrowing of both the public and private sectors, making it vulnerable to the willingness of the external sector to finance the twin deficits. In 2018, worsening global financial conditions triggered a selling pressure on the currencies of emerging economies with high external vulnerabilities, including the lira. The failure of the Central Bank of the Republic of Turkey (CBRT) to counteract this selling pressure with monetary tightening resulted in a strong depreciation of the lira, which lost almost 30% of its value against the dollar in 2018.

The depreciation led to a sudden and sharp tightening of both foreign and domestic financing conditions (the CBRT finally increased its one-week repo rate from 8% to 24%) and a sizable increase in inflation (16.3% in 2018), which caused a massive reversal in economic momentum. GDP growth slowed from 7.4% to 2.6% in 2018, while the economy contracted on a quarterly basis between the second and fourth quarters of 2018.

The economy is likely to avoid negative growth in 2019 in light of a strong contribution by net exports.

The stabilization of the lira following a massive interest rate hike has created preconditions for economic recovery. The economy is on track to avoid negative annual growth in 2019 on the back of a strong contribution by net exports, which are likely to add more than four percentage points to GDP growth. Strong depreciation of the lira has led to a sharp contraction of imports, while exports grew at a solid pace in light of increased cost competitiveness.

Domestic demand remained subdued in 2019, largely due to the ongoing contraction in investment activity on the back of weak business sentiment and tight credit. In Q3 2019, gross fixed capital formation contracted by 13% year-on-year based on Eurostat’s seasonal adjusted data. Private consumption remains constrained by weak labor market conditions. The seasonally adjusted unemployment rate rose above 14% in Q3 2019 based on Eurostat methodology, the highest this century.

Figure 2. Year-on-year change of the USD/TRY rate and CBRT rate


Sources: CBRT, ACRA Europe

Figure 3. Contribution of particular components to the change of GDP

Source: AMECO

The weak labor market and tight credit are likely to constrain the recovery.

Major international institutions expect the economy to grow at a sluggish rate in 2019, between 0 and 0.5%. Growth is expected to pick up in the medium term, to around 3% in 2020 and 2021 as private consumption and investments are expected to recover gradually on the back of government stimulus and declining inflation and borrowing costs. Nevertheless, growth rates are likely to be substantially lower in the medium term than before the recession as the labor market conditions remain challenging and the weakened balance sheets of corporations and banks are likely to constrain investment and borrowing. Moreover, the strong contribution of net exports to GDP growth will abate on the back of stabilization of the lira exchange rate.

Figure 4. Dynamics of the unemployment rate in Turkey


Source: Eurostat

Renewed external stress and unpredictable domestic policies pose risks to the recovery.

Risks to the outlook are tilted to the downside. The external environment remains challenging. Another wave of risk aversion in the global financial markets would have the potential to renew the selling pressure on the lira, which would likely put the economy under further stress given low reserves and high private sector FX debt and external financial requirements. Unpredictable domestic policies are another source of concern. The recently introduced new economic program, which targets 5% growth for 2020–2022 might lead to policy measures aimed at boosting short-term economic performance at the expense of long-term stability. Public banks are already increasing lending at a much faster pace than private banks, which implies a higher risk of NPLs for them in the medium and long term (see the Public Finance section).

Figure 5. OECD countries with highest and lowest ratios of minimum to median wage


Source: OECD, 2018

The minimum wage in relation to the median wage is the highest among the OECD countries.

Turkey’s competitiveness is moderate. Globally, the country scored above average in the most recent rankings of Doing Business (33rd), Global Competitiveness Index (61st) and Economic Freedom Index (68th). Nevertheless, there are certain areas for improvement on the structural side. Turkey scores low in the flexibility of the labor market according to the World Economic Forum (99th out of 141 countries), mainly due to high redundancy costs (almost 30 weeks of salary on average). The efficiency of the labor market is also constrained by the high minimum wage, which amounted to 71% of the median wage in 2018, according to OECD data. This figure is the highest among OECD countries, with the average for the OECD standing at 52%. In ACRA Europe’s view, addressing these issues would contribute to a faster reduction in unemployment and improve the growth potential of the economy.

A further improvement in the growth potential could be delivered by improving the quality of the labor force and upward social mobility of the population. Despite an improvement since 2015, the average PISA score for reading, mathematics and science remains below the OECD average (463 vs 488). Investment in R&D averaged 0.93% of GDP in 2015–2017 (the OECD average stood at 2.35%). The GINI coefficient stood at 41.9 in 2016, according to the World Bank, higher than most of the big emerging economies, which indicates an underutilization of human capital.

Turkey has ample untapped labor force.

Demographic trends are positive for Turkey. The World Bank projects an increase of the working age population of around 10% by 2040. The size of labor force might be further expanded by increasing the female participation in the labor force (which stood at 33% in 2019, the lowest among the OECD countries) and increased integration of refugees. The projected increase in the working age population will be a positive factor for economic growth in the medium and long term.

Figure 6. Female participation rate compared to G-20 emerging market peers


Source: World Bank, 2019

Medium and long-term growth prospects are solid.

Taking all this into account, economic growth is expected to remain solid in the medium and long term, given the solid demographic trends and above average competitiveness indicators. Major international institutions project the economy to grow by more than 3% annually in the coming decade and close to 2.5% in the 2030–2060 period, which is solid for a country at Turkey’s level of GDP per capita.

Efficiency of the monetary policy is constrained by the lack of central bank independence.

The efficiency of Turkey’s monetary policy is weak in ACRA Europe’s view. Inflation is high and volatile, and inflation expectations are weakly anchored. The average annual inflation rate has been running above the upper bound of the target corridor (currently 5% +/- 2%) since 2011. With increased selling pressure on the lira, which has been exacerbated by the reluctance of the CBRT to tighten its policy due to political pressure, the inflation rate rose to double digits as a result of a sharp increase in imported goods. In 2017, the annual HICP inflation averaged 11.1% and rose to 16.3% in 2018.

Figure 7. Year-on-year change of the USD/TRY rate and inflation


Sources: Eurostat, ACRA Europe

Inflation is falling, but it is expected to remain elevated in light of expansionary policies.

In recent months, inflation has moderated on the back of exchange rate stabilization and subdued domestic demand. Annual inflation has been running at around 10% since September 2019, while the average annual inflation for 2019 is projected to decline to close to 15%. In ACRA Europe’s view, inflation is likely to remain above the target range in 2020 in light of expansionary fiscal policy and monetary loosening. A further increase in inflation cannot be ruled out as external vulnerabilities and a lack of central bank independence might lead to further depreciation of the lira.


Figure 8. Factors contributing to the change in the debt to GDP ratio


Sources: IMF, ACRA Europe

High nominal GDP growth has limited the increase in the debt to GDP ratio so far.

Turkey’s debt to GDP stands at slightly above 30% (EU definition). It has increased only slightly since its 2015 low of 27.6%. This is because high nominal GDP growth (mainly due to inflation effects) has to a large extent mitigated the negative impact of the expansionary fiscal policy and the increase in the FX debt levels along with FX debt servicing costs in local currency terms. Interest expenditures in proportion to general government revenue increased from 6.9% to 9.1% in 2018, the highest since 2012, according to the World Bank.

The debt to GDP ratio is projected to increase in the coming years on the back of the government’s expansionary fiscal policy aimed at propping up the economic recovery. The IMF expects the non-financial public sector deficit to increase to 5.2% of GDP (excluding the 2019 central bank super dividend accounting for approximately 1% of GDP) in 2019 and remain elevated under a no policy change scenario, despite the government’s ambition to keep the deficit below 3%. As a result, the IMF projects the debt to GDP ratio to increase to 37% by 2024.

The share of both FX and external debt in the total debt is increasing.

Although the debt levels are sustainable, some recent trends are a cause for concern. The share of both external and foreign currency debt in the public debt have increased substantially as a result of lira depreciation and increased use of foreign debt markets. According to the latest figures (November 2019), the external public debt stock accounted for almost 45% of total debt (moreover, 10% of domestically issued debt is held by non-residents) and foreign currency debt accounted for almost 50% of total debt. At the beginning of the decade, these ratios stood below 30%.

Figure 9. Dynamics of the share of FX and external debt to the total debt


Source: Ministry of Treasury and Finance

Foreign investors are still cautious about Turkish debt.

The high share of external and FX debt makes refinancing more susceptible to foreign investors’ sentiment and the debt to GDP ratio dependent on exchange rate dynamics. At the time of writing this report, the negative sentiment toward Turkish debt was gradually declining. In early January 2020, the spreads on the 5Y USD Credit Default Swap stood close to 280 bps, the lowest since June 2018. Nevertheless, the valuation of Turkish CDS is still very high in terms of large emerging economies, indicating investors’ cautious attitude to Turkish debt securities.

International reserves do not fully cover the FX public debt.

In case of a resumption of the negative sentiment towards Turkish external public debt securities, there might be a further drain on the country’s international reserves, which can currently cover only around 96% of Turkey’s FX public debt. On the other hand, Turkish external public debt has a comfortable average maturity of 8.9 years, with estimated financing needs at 1.3% GDP in 2020. Therefore, in ACRA Europe’s view the probability of refinancing stress is low in the short-term. However, a failure to regain investors’ confidence in the long term would increase the refinancing risk.

Figure 10. 5Y USD CDS spreads for the G-20 emerging economies


Source: worldgovernmentbonds.com, 08.01.2020

Structural balance is worsening on the back of the government’s stimulus.

Turkey’s fiscal policies are moderately pro-cyclical. Prior to the 2018 recession, the five-year average of the general government’s structural balance (IMF definition) stood at -2.5% of the potential GDP, lower than the average for the G-20 emerging economies. Given the high nominal GDP growth, such structural deficits are considered sustainable in ACRA Europe’s view. The IMF expects the structural deficit to widen to above 4.5% in 2019 on the back of the government’s fiscal stimulus aimed at boosting economic recovery. Given the negative output gap and relatively low government debt load, the current fiscal expansion is to some extent justifiable. However, ACRA Europe could reconsider this assessment should the government continue to pursuing strong fiscal expansion after a recovery of growth.

Figure 11. Dynamics of the general government’s structural balance compared to the G-20 emerging market average


Sources: IMF, ACRA Europe

The share of mandatory public expenditures is lower than the OECD average.

ACRA Europe considers fiscal flexibility to be moderate. The IMF expects the general government revenue to account for 30.2% of GDP in 2019, close to the median value for the G-20 emerging economies. This indicates certain room to increase tax revenues in case of fiscal stress. Looking at the structure of public expenditures, the share of public spending on wages and social benefits in the total expenditures stood at 55% in 2017, well below the OECD average of 64%, giving the government moderate leeway on the expenditure side.

Public banks are expanding their lending at a strong pace.

Contingent liabilities are related to both the financial and non-financial sectors. The government is relatively heavily involved in the banking sector, with state-owned banks owning 41% of the sector’s assets. These banks have become a vehicle for the government’s current expansionary policies and are increasing their loans at a strong pace in an increasingly challenging environment for the banking sector. In November 2019, the year-on-year growth of state-owned banks’ loans stood at 17.9%, compared to 1.3% and 3.9% for domestic private banks and foreign banks, respectively. The significantly lower risk tolerance of the state-owned banks compared to the rest of the banking sector indicates a higher risk of future loan losses, and thus contingent liabilities for the government.

Figure 12. Dynamics of bank loans by ownership (2018/1=100)


Sources: Banking Regulation and Supervision Agency, ACRA Europe

Figure 13. Dynamics of dollarization of loans and deposits


Source: Banking Regulation and Supervision Agency

The banking sector faces growing challenges.

Moreover, the dollarization of the Turkish banking sector is increasing. The share of FX deposits stood at 49% in Q3 2019 and the share of FX loans stood at 39%, up from 43% and 33% in 2017, respectively. Banks are relatively highly dependent on short-term wholesale FX funding, making the banking sector more susceptible to refinancing risk. This challenging environment is exacerbated by the increasing NPL ratio (it stood at 5.2% in November 2019 compared to 3.9% in 2018 and is expected to increase further given the over 10% share of Stage 2 loans with high risk of non-payment), elevated funding costs, stressed corporate balance sheets, and decreasing profitability of the banking sector. While the banking sector’s comfortable level of capitalization (the capital adequacy ratio stood at 18.4% in Q3 2019) is providing some cushion, renewed selling pressure on the lira and/or a significant increase in NPLs might put banking balance sheets under further stress and increase the risk of recapitalization from public funds.

PPP projects are a major source of non-financial sector contingent liabilities.

According to the treasury, contingent liabilities related to external debt (treasury guaranteed external debt stock, PPP projects with treasury guarantees, and external debt of the public institutions without treasury guarantees) account for approximately 7% of GDP, half of which are related to the banking sector. In reality, non-financial sector contingent liabilities are much higher — the Ministry of Development reports PPP projects with a total investment value of 67.6 bln USD (9% of GDP). Moreover, according to the IMF, this figure does not include some projects contracted by state-owned enterprises and municipalities, and PPI projects.

Aging-related contingent liabilities are relatively low in light of positive demographics and should not constrain the sustainability of Turkish debt in ACRA Europe’s view. The IMF projects pension and healthcare-related spending relative to GDP to increase by 0.9 percentage points by 2030, compared to the 2 percentage point average for the emerging G20 countries.

Figure 14. Projected aging-related spending change by 2030 (% of GDP) for the G-20 emerging economies


Source: IMF. Fiscal Monitor Database, October 2019


ACRA Europe considers the external position of Turkey to be weak. Although the sharp depreciation of lira has put an end to the chronically high current account deficits, it has also significantly increased the external debt load in relation to GDP. International reserves remain low and they might prove insufficient to counter another sizeable external shock.

The current account underwent a strong adjustment following the currency collapse.

The current account balance is projected to be slightly negative in 2019, whereas in 2017 it stood at -5.6% GDP. Such a significant improvement comes on the back of import compression and strong exports in local currency terms following the depreciation of the lira. The trade balance has improved from -4.5% of GDP in 2017 to +1.7% in Q2 2019 (on a four-quarter rolling sum basis). The current account balance is propped up by the balance of services (+3.9% in Q2 2019), mainly due to tourism-related exports, and the income deficit has widened somewhat to -1.5%. ACRA Europe expects the current account deficits to widen as growth recovers, however, a return to levels seen prior to the currency crisis is unlikely given the constrained access to foreign financing.

Figure 15. Current account balance structure


Sources: Eurostat, ACRA Europe

External debt is almost exclusively FX denominated and can be attributed mostly to the private sector.

External debt accounts for approximately 60% of GDP, the highest among the G-20 emerging economies. Since 2016, the ratio has increased by more than 10 percentage points due to revaluation of FX liabilities. The structure of the external debt points to further risks — approximately 95% is denominated in foreign currencies, while the household, banking and corporate (excluding intercompany loans) sectors, which are more prone to refinancing risks, account for almost 75% of the total external debt according to the World Bank.

Figure 16. External debt statistics

  External debt (% of GDP) FX external debt (share of total) Reserves (% of FX external debt) Net international investment position (% of GDP)
Turkey 58 95 23 -48
Russia 27 70 153 22
India 19 65 119 -16
Mexico 37 76 54 -46
Brazil 36 76 74 -32
period 2018 Q2 2019 Q2 2019 2018

Sources: World Bank, IMF, ACRA Europe

Reserve coverage ratios are low, net reserves only account for about a third of gross reserves.

External debt maturing within the next 12 months stood at 167 bln USD (almost 40% of the total) in October 2019, with 130 bln attributable to the private sector. The IMF estimates the gross external financial requirements (including interest payments) in 2020 at 191 bln USD. Gross international reserves stood at 104.8 bln USD in November 2019, which is far less than the short-term external debt and 2020 gross external financing needs. Reserves can cover around one-quarter of the total FX debt.

The lira is constantly depreciating, while most of the other emerging markets currencies have been more or less stable in recent years.

The structure of the international reserves raises some concerns. A large portion of the reserves comprises of banks’ required FX deposits held against their FX liabilities. According to the IMF, net international reserves (net of FX liabilities to banks) account only for about a third of the gross reserves. A decline in domestic FX deposits held by banks would lead to a decline in banks’ required FX reserves at the CBRT, and thus, to lower international reserves available to the CBRT.

In terms of exchange rate dynamics, the lira has lost 12.4% of its value on average against the dollar in the previous decade, the second-worst performance among the G-20 emerging market currencies after the Argentine peso. Given high inflation, expansionary monetary and fiscal policies, and low central bank credibility, this declining trend is likely to continue in the coming years, which will make the reduction of external debt challenging. Therefore, ACRA Europe expects the external debt in proportion to GDP to remain elevated by emerging markets standards.

Figure 17. Dynamics of the major emerging market currencies against the dollar (2009=100)


Sources: ECB, ACRA Europe


Turkey’s governance framework is weak by global standards, with the main laggards being the Political Stability and Absence of Violence, and Voice and Accountability indicators.

Turkey’s institutional framework is deteriorating. The country’s average score for the World Bank’s Worldwide Governance Indicators fell to its lowest level since 1996, when the data was first released. Despite some improvement since the failed coup in 2016, the Political Stability and Absence of Violence indicator is by far the worst among the G-20 emerging economies. Relatively frequent terrorist attacks (Turkey ranks 16th in the 2019 Global Terrorism Index prepared by the Institute for Economics & Peace) and the country’s involvement in the Syria conflict also contribute to this assessment. Political instability is hurting business in the country, it was the most problematic factor for doing business according to the 2017-2018 Global Competitiveness Report (named by 13.7% of respondents). ACRA Europe sees a risk of a renewed decline in the Political Stability and Absence of Violence indicator due to a potential escalation of the Syria conflict, however, the impact of the conflict on the Turkish economy is likely to be contained as the fighting is happening outside the Turkish borders.

Figure 18. Historical development of selected Worldwide Governance Indicators


Sources: World Bank, ACRA Europe

Checks and balances have deteriorated following the constitutional reform.

The Voice and Accountability indicator is also well below the global average. Its deterioration over recent years can be attributed to the consolidation of power in the hands of President Erdoğan following the 2017 constitutional reform and an increased crackdown on the media. Turkey’s score in the EIU Democracy Index declined from 5.04 to 4.37 (110th out of 167 countries) between 2016 and 2018. In the 2019 Reporters Without Borders Press Freedom Index, Turkey ranked 157th out of 180 countries. Weakened checks and balances have significantly contributed to the decline of the other governance indicators. The negative impact of the weakened governance framework on the economy was demonstrated by the pressure on the CBRT to delay monetary tightening following the depreciation of the lira, which exacerbated the currency crisis.

Figure 19. World Governance Indicators compared to G-20 emerging market averages (global average = 0


Sources: World Bank, ACRA Europe, 2018

Utilization of the human capital in the economy is increasing. ACRA Europe’s human capital index comprising of average years of schooling, adult mortality and life expectancy at birth has increased by 24% over the last 10 years. The score of 240 is slightly above the average for the G-20 emerging economies.

Appendix 1. Comparative analysis of Turkey and the sample group

Comparison of macroeconomic and institutional indicators for 2018

  Turkey Brazil India Mexico Russia South Africa
Macroeconomics GDP per capita (1000 USD, PPS) 28.0 16.1 7.9 20.6 28.8 13.6
Real GDP growth (%) 2.8 1.1 6.8 2.0 2.3 0.8
CPI (% y-o-y) 16.3 3.7 3.4 4.9 2.9 4.6
Openness of economy (% of GDP) 60 29 43 80 52 59
Unemployment (ILO estimate) 11.9 12.2 2.6 3.4 4.5 27.3
Public finance Consolidated government debt (% of GDP) 30.2 87.9 68.1 53.6 14.6 56.7
Interest payments (% of revenue) 9.1 32.2 23.7 14.5 2.4 11.4
Consolidated government budget balance (% of GDP) -3.1 -7.2 -6.4 -2.2 2.9 -4.4
Credit to private non-financial sector (% of GDP) 84.0 70.3 56.1 41.8 62.7 72.2
External position Current account (% of GDP) -3.5 -0.8 -2.1 -1.8 6.8 -3.5
Net international investment position (% of GDP) -48 -32 -16 -46 22 12
External debt position (% of GDP) 58 36 19 37 27 47
Short-term external debt to total external debt (%) * 26.3 12.9 20.0 13.7 11.8 27.7
Export diversification index *** 0.44 0.56 0.47 0.43 0.64 0.54
Institutional framework ** Political stability and absence of violence -1.33 -0.36 -0.96 -0.57 -0.50 -0.28
Government effectiveness 0.01 -0.45 0.28 -0.15 -0.06 0.34
Rule of law -0.32 -0.28 0.03 -0.67 -0.82 -0.10

* At original maturity.

** Assessment of effectiveness ranges from approximately -2.5 (weak) to 2.5 (strong).

*** Indicates the extent of differences between the country’s trade structure and the average world indicator and ranges from 0 (weak differences)
to 1 (strong differences).

Sources:  IMF, World Bank, BIS, UNCTAD

Appendix 2. List of material data sources

International Monetary Fund
World Bank
The Bank for International Settlements
European Commission
Organisation for Economic Co-operation and Development
Central Bank of the Republic of Turkey
Republic of Turkey Ministry of Treasury and Finance
Banking Regulation and Supervision Agency

Appendix 3. Key indicators


Balance of payments, USD bln

  2015 2016 2017 2018
Balance of goods -48.1 -40.9 -59.0 -41.9
Exports 152.0 150.2 166.2 174.6
Imports 200.1 191.1 225.1 216.5
Balance of services 24.2 15.3 19.9 25.8
Exports 47.0 37.8 44.0 48.8
Imports 22.8 22.5 24.1 23.0
Balance of income -8.2 -7.5 -8.3 -11.1
Income receivable 7.0 8.3 9.5 8.9
Income payable 15.3 15.8 17.8 20.0
Current account  -32.1 -33.1 -47.3 -27.2
Current account, % of GDP  -3.7 -3.8 -5.6 -3.5
International reserves at the end of the period 110.5 106.1 107.7 93.0

Source: IMF


External position (assets and liabilities), USD bln

  2015 2016 2017 2018
External debt 400.4 409.7 454.5 440.7
long-term 295.1 308.0 334.8 326.8
short-term (up to 1 year) 105.4 101.6 119.7 113.9
External liabilities 400.4 409.7 454.5 440.7
Sovereign issuer, including 118.0 124.4 137.9 145.8
monetary authorities 1.3 1.1 1.8 5.9
consolidated government 116.6 123.3 136.2 139.9
Banks 157.4 149.2 162.2 139.3
Other sectors 125.1 136.0 154.4 155.6
External assets. excluding shares 181.7 182.1 192.5 188.6
Sovereign issuer, including 113.1 108.3 109.4 94.7
central bank assets 112.1 107.7 109.3 94.6
other external assets 1.0 0.6 0.1 0.1
Banks 29.2 36.1 42.4 52.0
Other sectors 39.3 37.7 40.7 41.9
Net debt -218.8 -227.6 -262.0 -252.1
Sovereign issuer -4.8 -16.2 -28.5 -51.1
Banks -128.2 -113.1 -119.8 -87.3
Other sectors -85.8 -98.4 -113.7 -113.7
International investment position (net), % of GDP -44.8 -42.8 -54.4 -48.1
External debt, % of GDP 46.6 47.4 53.3 57.1

Sources: CBRT, IMF

Budget indicators, % of GDP

Consolidated government 2015 2016 2017 2018
Income 32.1 32.7 31.4 31.5
Expenses 33.4 35.1 33.6 34.6
including debt servicing expenses 1.9 1.4 1.3 1.5
Primary budget balance 0.6 -1.0 -0.9 -1.6
Overall budget balance -1.3 -2.4 -2.2 -3.1
Consolidated government debt 27.5 28.2 28.2 30.4
% of income 86 87 90 96
Central government debt 30.3 30.7 30.2 31.8
Local government debt 1.4 1.6 1.7 1.9
Between sector consolidation -4.1 -4.1 -3.7 -3.2
Note: nominal GDP, USD bln 859.4 863.4 852.6 771.3

Sources: IMF, Ministry of Treasury and Finance

Rating history

The rating was first released for distribution on January 18, 2019, with the last review on July 12, 2019.

Regulatory disclosure

The sovereign credit ratings have been assigned to Turkey under the Methodology to assess Sovereign entities. An explanation of the importance of each rating category and a default definition is included in the ACRA Europe website. Information on the rate of historical failure is available at www.cerep.esma.europa.eu. The default rate means a percentage of ratings that were changed to default from the overall number of ratings, for each rating category and given period. The disclosure of the unsolicited rating and outlook was preceded by the approval of the Rating Committee. Since July 30, 2012, ACRA Europe has been a registered credit rating agency according to Regulation (EC) No 1060/2009 of the European Parliament and of the Council of September 16, 2009, on credit rating agencies.

The sovereign credit ratings and their outlook are expected to be revised within 6 months following the publication date of this press release as per the Calendar of planned sovereign credit rating revisions and publications.

The credit rating was issued as unsolicited. The rated entity did not participate in the credit rating assignment. ACRA Europe did not have access to the rated entity’s internal documents or management. ACRA Europe, in the context of routine care, verified all sources entering the rating process and considers the scope and quality of the information entering the analytical process to be sufficient to assign a credit rating. The rated entity was notified on January 9, 2020 and after the notification there were no changes or amendments in the rating.

ACRA Europe provided no additional services to the Turkish government. No conflicts of interest were discovered in the course of the sovereign credit rating assignment.


Rating report

Research report

Minutes from the Rating Committee meeting