Turkey’s attraction to foreign investors rose again this week, following the upgrading of its government bond ratings by international ratings agency Moody’s, who also assigned a stable outlook for the country. This comes after Fitch’s upgraded Turkey’s investment grade towards the end of last year.
The two key reasons given for the upgrade were improvements in key economic and public finance metrics, and progress in structural and institutional reforms, which Moody’s expects will reduce existing exposure to international capital flows. In its statement, Moody’s stated that since the beginning of 2009, Turkey’s debt burden has fallen by 10 percentage points to a manageable 36 per cent of GDP, and it expects this decline to continue in the coming years.
Encouragingly, it also noted that the government’s revenue streams have demonstrated resilience in recent years. For example, even in the face of contraction in real GDP growth by 4.8 per cent in 2009, general government revenues increased by over two percentage points in that year and since then have remained on an upward trajectory.
Moody’s highlighted how the government’s wide-ranging institutional reform programme should gradually erode the country’s external vulnerabilities over the longer term. For example, on 1st January 2013, a new incentive scheme to increase investment in personal pensions caused the number of participants and the amount of contributions to increase by 13.5 per cent and 12.1 per cent in the first four months of the year respectively. The government also adopted a new commercial code in 2012 that will improve corporate governance standards and overall competitiveness.
The confidence boost from these positive indicators will encourage more foreign investment in Turkish property, helping to maintain property values and encourage the construction of new projects.