Turkey's government bond rating goes to Ba2 from Ba3

Recent upgrade news were good . Moody's upgrade helps Turkey catch Armenia, but not Egypt (Ba1) or bankrupt governements like Ireland( Aa1) or Greece (A2). The only reason so far was to create loans with higher interest rates to Turkey and more of it. This large economy can pay her depts and what is wrong with some unashamed profit taking. Same old same old.

Mavi Boncuk

London, 08 January 2010 -- Moody's Investors Service has today upgraded Turkey's government bond rating to Ba2 from Ba3, reflecting Moody's growing confidence in the government's financial shock-absorption capacity. The outlook was changed to stable from positive.

"Although Turkish growth has contracted very sharply - even more sharply than was seen in its 2001 financial crisis - the resilience of the public finances relative to past such crises has been notable," said Sarah Carlson, the lead analyst for Turkey in Moody's Sovereign Risk Group. "The ability of the government and the country more generally to regroup when faced with a very significant economic and financial challenge indicates that Turkey has reached a higher level of resiliency - which is what our ratings ultimately reflect."

Carlson said that the Turkish economy's ability to rebound from shocks, whether external or domestic, is the product of a significant improvement in the policy credibility over the last decade. She called the recent financial crisis a kind of 'stress test' for these policy reforms.

Looking ahead, the economy is now starting to recover and capital inflows have resumed. The Turkish government has proven access to foreign capital, as was demonstrated by its new US$2 billion 30-year Eurobond issue. This was the largest-ever emerging market sovereign transaction of that maturity.

"Moreover, the government's fiscal exit strategy has begun with the passage of the 2010 budget," said Carlson. "The budget was in line with the Medium-term Expenditure Plan, announced in September 2009, and represents a first step in a three-year plan towards reining in the budget deficit and returning the budget to a primary surplus position, barring election-related spending setbacks."

Moody's said that the foundations for Turkey's long-term growth are also looking robust, although growth is not likely to resume at the pace achieved in the mid-2000s due to both global and local factors. Still, the country has become increasingly open to the global economy and Turkish industry - which was already moving up the value chain - has used the financial crisis to expand into new export markets and therefore reduce their dependence on EU countries. The population dynamics are also its favor.