Global rating agency Fitch upgraded Turkey's credit rate by two notches to 'BB' (+). The agency also upgraded Turkey's long-term foreign currency Issuer Default Rating (IDR) to 'BB+' from 'BB' and Turkey's country ceiling grade from BB to BBB(-).  

52 countries' ratings, including Greece, Hungary, Ireland, Thailand and Mexico, are downgraded. Analysts emphasize that Turkey is no longer among the countries whose ratings are downgraded first due to global or regional crisis and point out that Turkey is among a few countries that exhibit a "positive" outlook.

According to ING Bank's analysis, Turkey's economic potential and strength in the face of the financial crisis were underestimated and its credit default swap spreads (CDS) overvalued.

The study predicts international rating agency Standard & Poor's (S&P) will raise its outlook on Turkey to positive from stable in the next few weeks. ING also stresses that Moody's might upgrade Turkey's rating in the first half of next year as well.

Turkey's Potential to Enter Investment Friendly Category Increases

Turkey is among 10 countries expected be branded as a "safe" country for investments in the next one to two years.

Following the start of a high economic growth phase in the banking sector, Turkey's credit rating is predicted to be increased to BBB, qualifying the country as a safe place to make investments in.

The rise in credit rating will provide the Treasury and private sector with an opportunity to borrow from international markets at lower costs and for longer terms.

How is the Credit Rating Given?

Credit rating is seen as an indication of the likelihood and ability of a borrower to pay a debt and its interest back at a specified time.

The most delicate means of credit rating are likelihood and ability to pay the debt. Rating can be performed for only one operation, institution or country.  Credit ratings are calculated from financial history dating back 15 to 20 years. When calculating the credit ratings of countries, economic and political risk factors are taken into account. Foreign currency cash flow, debt ratio, expansion of exports, balance of payments, the current account balance, the ratio of short-term capital flow to reserves, growth rate, total savings, public debt, investments and inflation are among the economic risk factors considered.

Political risk factors are enlisted as the electoral system and election dates, developments in foreign policy, the workings of democracy, political parties, relations between the government and opposition parties, risks in the political field and the degree of independence of the country's central bank.

What do the Grades Mean?

Being among the countries (or institutions) with a high credibility indicates that the country is a "safe place for investments". Three "A"s like AAA, Aaa are considered as the safest. Although Baa3 or BBB (-) indicates low risk, they still mean "safe for investment".

Speculative countries or institutions are graded gradually from B or BA1 to B3 and B (-).Turkey's credit rating is Ba3 in Moody's, BB- in S&P and BB+ in Fitch's ratings.

Source: www.hurriyet.com.tr