Fitch Warns of Pressure on Türkiye’s Municipal Credit Ratings

According to a new report by Fitch Ratings, the credit outlook for major metropolitan municipalities in Türkiye faces renewed pressure due to increasing macroeconomic instability, high inflation, and a modest 2.6% GDP growth forecast for 2025—factors that have worsened following the detention of Istanbul Mayor Ekrem İmamoğlu.

Despite this, Fitch expects nine municipalities to maintain relatively stable repayment capacities, backed by resilient operating margins, moderate flexibility in adjusting capital expenditures during market volatility, and strong liquidity positions.

Fitch Raised Municipal Ratings After Sovereign Upgrade in 2024

Following Fitch’s upgrade of Türkiye’s sovereign rating to ‘BB-’ with a Stable Outlook in September 2024, the agency increased the Issuer Default Ratings (IDRs) of eight municipalities, with the exception of Konya, whose credit profile had not been capped by the sovereign rating at the time.

In February 2025, Fitch further revised these ratings upward after Türkiye exited the 'B' category, following a shift in its Risk Profile assessment from 'Vulnerable' to 'Weak'.

Municipal Ratings Now Capped by Sovereign Ceiling

All metropolitan municipality IDRs are currently capped by the sovereign rating, but their Standalone Credit Profiles range from ‘bb+’ to ‘bbb+’, five notches above the national rating.

However, Fitch warned of potential deterioration in operating balances due to unexpected economic slowdowns or surging inflation, which could undermine fiscal resilience.

The Stable Outlooks on municipal IDRs remain in line with the sovereign credit outlook.