TURKEY: S&P boosts confidence with improved economic outlook

04 August 1995

The US ratings agency Standard & Poor's (S&P) has upgraded its forecast for the Turkish economy, despite maintaining the rating of Turkish risk at sub-investment level. Turkish officials welcomed the revised economic outlook, and the government increased the size of its latest Eurobond launch to DM 500 million ($360 million) from DM 300 million ($216 million) following the announcement (see below).

S&P now classifies the country's economic outlook as 'positive,' compared with the previous classification of 'stable.' However, the US agency left the risk rating unchanged at B+, urging the government to push ahead with structural economic reforms. S&P also maintained its rating at B+ for state-owned Ziraat Bankasi (Agricultural Bank) and for Ankara municipality. S&P said another review could go ahead in 1996 if the government further strengthened its fiscal and external balances.

Turkey was downgraded to sub-investment levels by S&P and another leading US ratings agency, Moody's Investors Service, during the 1994 economic crisis. Since then, senior officials have pressed for an upgrading on the strength of economic targets the government has achieved in the IMF- sponsored recovery programme.

Moody's is to update its Turkey rating soon, and is expected to take a similar line to S&P. Moody's now rates Turkish risk at Ba3.

Since the spring, the government has sought alternative ratings by the US' Duff & Phelps, which gave the country a rating of BB just below investment grade, and the London-based IBCA.

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