Fitch Warns: Turkish Industrial Firms Face Credit Rating Pressures in 2025

Fitch Ratings has flagged rising financial risks for Turkish industrial companies in 2025, citing currency depreciation, elevated debt levels, and weak cash flows as key factors driving potential credit rating downgrades. Consumer-facing giants like Arçelik and Vestel are expected to be among the most vulnerable.

Currency Pressures and Inflation Undermine Financial Stability

In its latest industry analysis, Fitch Ratings outlined the challenges facing Turkish manufacturers amid persistent lira depreciation, which inflates the cost of imported inputs and raises the burden of foreign currency-denominated debt.

Meanwhile, soaring inflation is eroding consumer purchasing power and increasing wage pressures, further squeezing profit margins. According to Fitch, Arçelik (BB-/Negative) and Vestel (B-/Negative) — both of which sell to the Turkish market and the European Union — are likely to suffer the most under these conditions.

The agency also pointed to unpredictable fiscal and monetary policies, volatile interest rates, and ongoing capital controls, which are making Turkey’s business environment more uncertain. A slowdown in EU economic growth, coupled with elevated domestic interest rates, continues to dampen demand, while rising competition from Chinese exporters and the real appreciation of the lira are squeezing Turkish exporters.

Rising Debt and Cash Flow Strains

According to Dünya Gazetesi, Fitch’s report projects a jump in average Net Debt/EBITDA ratio from 2.3 in 2022 to 3.8 by 2025 — reflecting a substantial deterioration in corporate balance sheets. As operating cash flows weaken and working capital needs grow, companies are increasingly reliant on debt financing.

Fitch anticipates continued negative or weak free cash flows in the short to medium term. This scenario is especially risky for companies in the “B” rating category that carry high short-term debt, raising concerns around liquidity and refinancing risks.

However, one mitigating factor highlighted is that many Turkish firms maintain strong relationships with domestic banks, allowing them to refinance debt within local capital markets — a critical buffer in volatile conditions.

Sector Winners and Losers

Fitch’s sectoral breakdown indicates some companies are better positioned than others:

Advantaged firms:

• Limak (B+/Stable) and Çimko (B+/Stable) benefit from foreign-currency contracts or the ability to pass on energy costs.

Disadvantaged firms:

• Şişecam (B/Negative) is cited as particularly vulnerable to commodity and energy price fluctuations, leaving it exposed to global market volatility.

Outlook: More Downgrades Possible

Fitch concludes that unless macroeconomic risks are mitigated and access to funding stabilizes, more credit rating downgrades are likely in 2025. The combination of declining demand, rising input costs, and financing constraints may further test the financial resilience of Turkish industrial players.