The move coincided with a session at the St Petersburg Economic Forum entitled 'Turkey's Shifting Investment Flows', where industry panellists applauded the sustainable growth of Turkey's economy, measured at 8.5 per cent last year.

Turkey's previous Ba2 credit was increased to Ba1, which still defines Turkey as "judged to be speculative and subject to credit risk" but comes at a time when Moody's cut its rating on Spanish Government debt last week by three notches to Baa3 from A3, saying the newly approved euro zone plan to help Spain's banks will increase the country's debt burden.

Moody's claimed a significant improvement in Turkey's public finances as a reason for raising its sovereign credit rating.

Moody's was also positive about future trends for Turkey's economy in its statement, saying that "the drivers that led to today's rating upgrade will continue to improve the country's fiscal and macroeconomic resilience."

Another credit ratings agency, Fitch, also rates Turkey one notch below investment grade at BB+, while Standard & Poor's rates it a rung lower at BB.

Moody's said the upgrade noted efforts to address Turkey's current account deficit, the biggest risk to the country's rating.

The deficit, which reached 10 per cent of gross domestic product (GDP) in 2011, is among the highest in the world and seen as the main weak spot in an otherwise booming economy.

But it is expected to decline to eight percent of GDP this year.

"Turkey has one of the fastest growing economies anywhere, with great demographics," said Stephen Peel, the managing partner of TPG Capital and the former executive director of Goldman Sachs International in Europe.

Seen as key to Turkey's potential growth is its young population, which is larger than the total population of many European countries and is second in Europe only to Russia's.

Half the population is under the age of 30.

"Turkey's economic strength is important because it will allow our bid, and the 2020 Games, to reach their full potential," said Hasan Arat, the leader of the Istanbul 2020.

"Our master plan is ambitious in scale and would be spectacular in execution; we want the 2020 Games to be an iconic celebration of sport that unites and inspires young people all over the world."

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