S&P Says Turkish Corporates Enter 2026 With Strengthening Credit Outlook

As global financial conditions evolve and Turkey’s domestic economic framework stabilizes, S&P Global Ratings has released a forward-looking assessment of Turkish corporations, highlighting a cautiously improving credit environment heading into 2026. The report notes that while 2025 presented several headwinds—from high interest rates to sector-specific challenges—macroeconomic progress is now helping reinforce the overall credit narrative for rated Turkish companies.

Credit Quality Weakens in 2025 but Outlook for 2026 Improves

According to S&P, many Turkish corporates spent 2025 grappling with erosion in credit quality, driven by a combination of national economic adjustments and company-specific pressures. The agency points out that four investment-grade firms experienced negative rating actions over the year, reflecting elevated volatility across balance sheets and earnings profiles.

However, the shift toward 2026 introduces a noticeable improvement: among all rated companies, only one entity currently carries a negative outlook. This narrowing of downside risk suggests that the corrective phase Turkish corporates endured in 2025 has largely stabilized. S&P interprets this trend as evidence that credit deterioration is no longer broad-based, and supportive macro policies are beginning to take hold.

High Interest Rates Still the Biggest Credit Challenge

Despite the improving environment, S&P underscores that elevated interest rates remain the most significant credit risk for Turkish businesses. High policy rates continue to weigh on borrowing conditions, pushing up financing costs and pressuring profitability.

Even so, the report highlights one encouraging indicator: the median leverage ratio, measured as debt-to-EBITDA, stands at 2.6x—a level S&P characterizes as healthy for the corporate landscape. As Turkey’s inflation dynamics moderate and expectations build for lower policy rates, the agency anticipates an improvement in interest coverage and free cash flow generation across most sectors.

S&P notes that declining rates would relieve some of the pressure companies experienced in servicing debt throughout 2025, potentially allowing many to restore liquidity buffers and reduce refinancing stress.

Demand Weakness and Cost Pressures Outweigh Global Trade Risks

While global factors play a role in shaping corporate performance, S&P argues that domestic issues such as subdued demand and rising input costs pose a more immediate threat to Turkish corporate earnings. According to the report, both households and businesses felt the strain of reduced purchasing power in 2025, curbing revenue growth across multiple industries.

Export-oriented sectors—most notably steel, metals, and textiles—face an additional layer of difficulty. These industries remain sensitive to global conditions, including slower European demand and volatile commodity prices. The report emphasizes that the Turkish lira’s strong real appreciation against the US dollar could temporarily weaken exporters’ competitive position, squeezing margins as foreign market conditions remain only partially supportive.

Despite these headwinds, S&P does not foresee widespread distress. Instead, the challenges appear manageable, particularly if global demand stabilizes and Turkey’s domestic inflation continues to decline.

Corporate Liquidity Considered Broadly Solid

One of the most striking conclusions in S&P’s report concerns liquidity. The agency states that the liquidity positions of Turkish corporates are generally solid, marking a positive shift from previous years where refinancing risk loomed larger.

S&P projects no major refinancing cliff before 2028, giving companies valuable breathing room to navigate interest rate trends and investment decisions. The most significant hurdle is a Eurobond maturity exceeding $2 billion in 2028, which S&P considers manageable under current economic assumptions.

This stability is reinforced by improvements in macroeconomic indicators, notably lower inflation and greater predictability in monetary policy. As these trends continue, S&P expects companies to strengthen their balance sheets further and maintain adequate buffers against potential shocks.

Overall, S&P concludes that Turkey’s corporate sector is entering 2026 in better shape than it was at the start of 2025. Expectations of falling interest rates, healthier leverage profiles, and more predictable macroeconomic conditions underpin this momentum.