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A major step for Turkey

Rooftops in Ankara, Turkey

As Prime Minister Erdogan showcases Turkey's prestige on a visit to the White House, the country has its ratings upgraded...

May 19, 2013 9:45 by



Turkey’s achievement of investment-grade status crowns a decade of rapid growth, financial stability and political reform by a “tiger” economy on the seam of Europe and Asia, but the rising power still faces pitfalls in a dangerous neighbourhood.

Moody’s Investors Service raised its rating on Ankara’s sovereign bonds to Baa3, or investment grade, from Ba1 late on Thursday, following in the footsteps of Fitch credit ratings agency, which took that step last November.

The upgrade came on a day when Prime Minister Tayyip Erdogan was showcasing Turkey’s global prestige on a visit to the White House, and in a week when the emerging nation of 75 million made a final loan repayment to the International Monetary Fund.

“It was a major strategic step for Turkey,” said Erdal Tanas Karagol, economic director of the SETA think-tank in Ankara.

“This will help the current ruling party prepare long-term plans, to set higher goals and will create a suitable international environment to carry out those plans.”

The boost puts Turkey 11 notches on Moody’s rating scale above historic rival Greece, on the other side of the European Union frontier, and should drive more foreign direct investment (FDI) to an economy that still has great potential to grow.

“The ratings agencies are finally catching up with the fact that the Turkish government has done a huge amount of work in the last decade to put the country onto a stronger economic and political footing,” said Simon Quijano-Evans, head of emerging market research at Commerzbank in London.

Government debt has fallen to 30 percent of gross domestic product from more than 100 percent in the crisis years early last decade. Inflation and the budget deficit are falling.

POLICY ANCHOR

Turkey’s IMF programme and candidacy to join the EU provided a strong policy anchor in the early years of Erdogan’s mildly Islamist conservative AK party government from 2003. But the pace of political reform has slowed as EU accession talks have run into the sand due to Cypriot and French obstruction.

“There is a sense of a lost anchor,” said Sinan Ulgen, chairman of the Istanbul Center for Economics and Foreign Policy Studies, EDAM.

The EU had lost influence on issues such as media freedom, tolerance of dissent and freedom of expression because Turks no longer believed they were wanted inside the European bloc. Rights groups complain Erdogan is falling short on democracy.

Ulgen said the rating upgrade was a triple vote of confidence in the resilience of the Turkish economy despite Europe’s debt crisis, in sound economic and fiscal management, and in a strengthened geopolitical relationship with the West.



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