Moody's Changes Its Outlook on Turkey's Ratings to Positive From Stable

Moody’s Investors Service raised the outlook on Turkey’s Ba2 local and foreign currency bond ratings to positive from stable citing improvements in the economy and debt management.

“Turkey’s economy has proven to be unexpectedly robust and has recovered to pre-crisis levels,” said New York-based Moody’s analyst Sarah Carlson in an e-mailed report today. The country’s deficit and debt levels have improved beyond targets in the government’s medium-term economic program, she said.

Turkey says credit default swaps and other indicators show that the country’s debt rating should be raised by S&P, Moody’s and Fitch Ratings Ltd. Moody’s upgraded Turkey to Ba2 in January, two levels below investment grade and S&P increased its ranking in February to BB. Fitch raised its rating to BB+ in December, or one step below investment grade.

The benchmark ISE National 100 index in Istanbul climbed as much as 1.1 percent to 66,117.29 after Moody’s made the statement, nearing a record high. It rose 0.5 percent at 10:12 a.m. Two-year lira bonds gained, with yields falling 4 basis points to 7.99 percent. The lira reversed earlier losses, rising 0.1 percent to 1.4531 per dollar.

“We expect Moody’s and S&P to upgrade Turkey post-elections so in a year-long window we expect them to catch up,” said Turker Hamzaoglu, a London-based economist at Bank of America Corp.-Merrill Lynch & Co., said in a telephone interview. “For Turkey to become investment grade there are three main issues: inflation, whether the current account is under control, and how the government handles fiscal policy without a fiscal rule or the IMF.”

Moody’s revised its forecasts for economic growth in Turkey this year to 6.5 percent and to 5 percent in 2011, Carlson said. Parliamentary elections are due in Turkey by July 22 next year.

The economy grew an annual 10.3 percent in the second quarter, which matched China’s as the fastest expansion in the period among the Group of 20 major economies, the state statistics agency in Ankara said on Sept. 14.

To contact the reporters on this story: Steve Bryant in Ankara at; Peter Branton at

To contact the editor responsible for this story: Peter Hirschberg in Jerusalem at

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