The U.S.-based Standard and Poor credit ratings agency upgraded Turkey's local-currency sovereign credit rating to investment grade for the first time in history, highlighting the country’s relatively strong financial condition compared to its neighbors in Europe.

S&P upped the country’s rating by two notches to BBB- from BB+.

“The local-currency upgrade reflects our view of continuing improvements in Turkey's financial sector and the deepening of local markets,” S&P said in its statement.

S&P further noted that further upgrades are possible.

“The outlook on the ratings is positive,” the agency stated. “We could raise the ratings on Turkey if, once the economy cools as we expect, it can reduce its current account deficits and slow its domestic credit growth without too badly affecting its fiscal accounts or financial-sector stability. We could also raise the ratings if deeper reforms to social security resulted in a stronger fiscal performance that started to substantially reduce the government’s debt.”

However, the ratings agency also re-affirmed its foreign-currency sovereign rating on Turkey at BB (which is two levels below investment-grade), with a positive outlook.

Nonetheless, Vedat Akgira, chairman of Capital Markets Board of Turkey told the Anatolia news agency: “[The upgrade of local current sovereign rating] is an accurate decision. My personal view is that Turkey’s credit rating could have been raised more.”

Akgira added: It will have a positive impact on reducing the current account deficit permanently.”

Similarly, Tuncay Özilhan chairman of the Anadolu Group of companies told Anatolia: “When considering the countries with debt problems, Turkey deserved this [rate increase] for a long time.”

Özilhan also said he expected Turkey to see more interest from foreign investors following the ratings hike.

Another prominent Turkish executive, Ahmet Nazif Zorlu, chairman of Zorlu Holding, gushed to local media: “It is very crucial to witness a rating increase while European countries are going through hard times. From now on, Turkey will be able to get cheaper loans [via lower interest rates], and foreign investment in our country will speed up.”

In the first half of 2011, the country’s GDO expanded by 10.2 percent – a faster rate than even that of China.

Turkey has long complained that western credit agencies did not give the country’s surging economy enough attention and praise.

Economy Minister Zafer Caglyan regarded the upgrade as a kind of approval of the government’s economic policies.