The credit rating agency S&P Global Ratings unexpectedly raised Türkiye's sovereign credit outlook late Thursday to positive from stable on subsiding twin deficits and affirmed its rating at "B."

The move comes outside of a strict ratings calendar, and S&P said the deviation complies with recent policy adjustments, according to a statement.

These include last week's 10 percentage point hike in the central bank's benchmark rate to 40% as well as "the monthly current account surplus posted in September, and the recovery in usable reserves during the first 17 days of November."

"The steps we have taken are yielding results," said Treasury and Finance Minister Mehmet Şimşek on social media platform X, formerly known as Twitter.

Şimşek said confidence is increasing in Türkiye's medium-term economic program, unveiled in early September and featuring policies that require tighter monetary policy to rein in stubbornly high inflation.

"With patience and determination, we will continue to implement the program," said the minister.

A respected veteran policymaker, Şimşek has been leading a new economic administration that has orchestrated a shift toward more conventional monetary policymaking after the May elections.

Since June, the country's central bank raised its key policy rate, the one-week repo rate, by 3,150 basis points to curb the inflation, which is running above 61% and is expected to rise through May next year before dipping. The increases included hikes of 500 points in each of the last three months.

Authorities have also begun to untangle a raft of financial regulations to cool overheated demand and to rein in inflation.

"By ensuring price stability, a persistent decrease in the current account deficit, fiscal discipline and reserve accumulation, we will lead our country to a sustainable path of high growth," Şimşek said.

The S&P acknowledged that Turkish policymakers have been making progress on cooling down the country's "overheated" economy and rebuilding the central bank's stock of net foreign currency reserves.

Sustaining an uptrend since June, the central bank's total reserves rose by more than $2 billion to a record of $136.5 billion in the week to Nov. 24. Its net international reserves rose by nearly $7 billion to $35.81 billion, the highest level since March 2020, data showed on Thursday.

The rating could be raised "should balance of payments outcomes improve and domestic savings in Turkish lira rise," the S&P said.

It said deposit rates on local currency savings now exceed those on foreign currency savings products by nearly 40 percentage points, suggesting that "this should encourage the de-dollarization of domestic savings."

The agency said the recent data confirm that Türkiye's economy is slowing and rebalancing, with consumption softening since the start of the third quarter.

Earlier on Thursday, official data showed Türkiye's economy expanded by a more-than-expected 5.9% in the July-September period, driven by household spending.

But activity is expected to begin to slow after aggressive tightening meant to cool domestic demand and high inflation.

"Credit conditions are tightening, and fiscal support is tapering. Recent dollar weakness and U.S. interest rates stabilization have also reopened a window for some Turkish corporates, banks, as well as the sovereign, to issue external commercial debt," the credit rating agency said.

It also highlighted that Türkiye's twin deficits are declining.

"We project that the fiscal deficit for 2023 will be lower than targeted at 4.3% of gross domestic product (GDP) and that the current account deficit will gradually narrow as imports decline sharply during the last four months of the year and into 2024," it said.

The positive outlook indicates a possibility of an upgrade, but is not tied to a timeline. A "B" rating is five notches below investment grade.

The next scheduled review for Türkiye will take place in 2024, S&P said.