(Bloomberg) -- Turkey’s credit rating outlook was raised by S&P Global Ratings as the more-conventional policies of President Recep Tayyip Erdogan’s new economic team start to pay off.

S&P revised the outlook on the nation’s long-term foreign-currency issuer default rating to stable from negative and affirmed the credit rating at B, five notches below investment grade.

“We believe that by 2026, absent renewed political uncertainty, the new team can rebalance Turkiye’s economy away from external debt financed consumption and toward more balanced external and fiscal accounts, as well as more acceptable levels of inflation,” S&P said in a statement.

Following his election victory in May, Erdogan appointed two former Wall Street bankers to run the nation’s economy to rein in burgeoning inflation and lure back foreign investors. 

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Finance Minister Mehmet Simsek and Central Bank Governor Hafize Gaye Erkan have since tried to build credibility among international investors by reversing ultra-loose monetary policy and constant state interventions in financial markets. 

The central bank has more than tripled its key interest rate to 30%, while the government announced a macroeconomic framework that committed to reducing inflation and building back depleted reserves.

The lira has lost more than 30% of its value against the dollar this year, making it the second-worst performing currency in emerging markets.

“The stable outlook reflects balanced risks to Turkiye’s creditworthiness from the reimposition of orthodox monetary policy settings, as the Central Bank of the Republic of Turkiye, under new leadership, raises interest rates in an effort to reverse the deposit base’s dollarization and bring down elevated inflation, which we believe is eroding the country’s competitiveness,” S&P said.

S&P had lowered its outlook to negative from stable in March, citing challenges including costs from February’s devastating earthquakes and rising inflation. 

Following the overhaul of the economic team and steps toward tighter monetary policy, Fitch Ratings raised the nation’s credit rating outlook to stable from negative in early September, keeping its rating at B, still five notches below investment grade. Turkey is rated B3 by Moody’s Investors Service. 


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