Moody's Investors Service on Wednesday raised its ratings on Turkish government bonds by one notch to Ba1 from Ba2 with a 'positive' outlook, citing improvement in public finances.

This is the highest non-investment grade rating. According to Moody's, the main drivers of the rating action are the significant improvement in Turkey's public finances and the policy actions that have the potential to address external imbalances.

Moody's said the improved public finances have increased shock-absorption capacity of the government's balance sheet. Also, the authorities' recent policy actions are capable of addressing the huge current account deficit, which is the largest credit risk facing the country.

The agency said the decision to maintain the 'positive' outlook on Turkey's ratings reflected its expectation that both of the drivers that led to today's rating upgrade will continue to improve the country's fiscal and macroeconomic resilience.

An upgrade to an investment-grade rating will depend on Turkey becoming more resilient to balance-of-payment shocks, given the already favorable public-finance metrics, Moody's noted.

RTTNews