• Home
• /
• Markets

Moody’s raises Turkey’s credit rating

ANKARA, Turkey — Moody’s credit rating agency raised Turkey’s sovereign credit grade by one notch on Wednesday, citing significant improvements to its public finances and moves to reduce its current account deficit.

Moody’s said it has upgraded Turkey’s rating to Ba1 from Ba2 — just one notch below investment grade. It maintained its positive outlook for the country, citing an increased ability to withstand economic shocks. Moody’s Investors Services said efforts to lower Turkey’s debt burden were unlikely to be affected by the “challenging” economic environment or a slowdown in Turkey’s growth rate.

Mete Yuksel, deputy manager of investment bank TEB Yatirim, told state-run Anadolu Agency on Wednesday that the Moody’s upgrade was an “excellent development” that is likely to energize the markets.

Economy Minister Zafer Caglayan, however, was unsatisfied, saying it was not enough. “The rating that Turkey deserves is ‘investment grade’,” he said in a written statement.

Caglayan complained that Turkey, despite having a dynamic and stable economy, was kept at the same level as Hungary, Ireland and Guatemala.

Last month, Turkey’s Prime Minister Recep Tayyip Erdogan accused another ratings agency, Standard & Poor’s, of bias after it lowered the country’s credit outlook. S&P had said Turkey’s large current account deficit was highly dependent on short-term financing from outside Turkey, making it vulnerable to sudden financial account outflows and refinancing risks.

Turkey’s current account deficit in April stood at $69.2 billion or 8.3 percent of gross domestic product. That is a high level, even though the economy grew by 8.5 percent last year and by 9 percent in 2010.

Moody’s said it expects further improvement in Turkey’s public finances which would improve the government’s capacity to absorb sudden drops in economic growth or financial markets and more policy actions to reduce the current account deficit.

“Looking ahead, an upgrade to an investment-grade rating will probably be dependent on Turkey becoming more resilient to balance-of-payment shocks, given the already favorable public-finance metrics,” Moody’s said in a statement.

Turkey borrowed from the International Monetary Fund for decades and hopes to pay back its remaining debt of $1.7 billion to the IMF in April 2013 and not borrow from the fund again. In a move that symbolizes its confidence, Turkey has promised to contribute up to $5 billion to the IMF to boost the fund’s resources, Turkey’s Central Bank said in a statement Tuesday.

Turkey’s leaders, buoyed by strong economic growth in recent years, are proud that the emerging market’s economy is improving despite economic woes afflicting Europe.

However, the economy still has room for development.

Purchasing power in Turkey is half the average of the 27-member European Union, according to Eurostat, the European statistics agency. Turkey’s per capita GDP, an indicator used to measure the countries’ level of welfare, was nearly half of the EU average.