Moody's Upgrades Turkey's Sovereign Ratings to Ba1, One Notch Below Investment Grade

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Researched by Industrial Info Resources (Sugar Land, Texas)--Moody's Investor Services has announced that is has upgraded Turkey's government bond ratings by one notch to Ba1 from Ba2, and has maintained the positive outlook. The current credit rating is now just one notch below the coveted investment grade.

In the official statement, Moody's cites two reasons for its decision: The significant improvement in Turkey's public finances and the resulting increased shock absorption capacity of the government's balance sheet. Policy actions that have the potential to address external imbalances, such as the large current account deficit, which is the largest credit risk facing the country.

Turkish public finances, with a public debt-to-GDP ratio of 39.4% and a budget deficit-to- GDP ratio of 1.4% as of 2011, have for long been the strongest element of the country's macro fundamentals.

The Turkish government recently announced investment incentives mechanism to curb down current account deficit via attracting greenfield foreign direct investment in Turkey. In last six-month period, five oil and petrochemical firms laid out their new investment plans in Turkey, including State Oil Company of the Azerbaijan Republic (SOCAR) and Dow Chemical's (NYSE:DOW) (Midland, Michigan) which partnered with Aksa Akrilik Kimya AS (ISE:AKSA) (Istanbul, Turkey) to produce carbon fiber in Turkey. Turkey traditionally receives some 50% of foreign direct investments from Europe and is intensifying efforts to lure investors from the Middle and Far Eastern countries.

"Further upgrade by Moody's by one notch will make Turkey external debt in the investment grade category, which should attract further international interest in Turkey bonds," said Benoit Anne, emerging market strategist at Societe Generale in London.

Fitch downgraded Turkey's credit rating outlook to stable from positive on November 23, 2011, and affirmed the BB+ note. Also, Standard and Poor's did the same action with the BB note on May 1.

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