The Turkish lira is extending its rebound after hitting an all-time low against the US dollar last week. Despite official estimates anticipating Turkey’s economy to be in a full-year recession, Turkey’s credit rating and outlook remained stable, which might be driving up the lira to kick off the trading week.

Standard & Poor’s rating agency kept Turkey’s long-term foreign currency sovereign credit rating at B+ and its long-term local currency sovereign credit rating at BB-. S&P said that the nation’s outlook is stable, though it warned that the economy could contract 3.1% this year. It does expect the economy to recovery by 4.2% next year and 3.5% in 2022 and 2023.

The credit rating firm said in a statement:

The COVID-19 pandemic will likely push the Turkish economy into recession and drive the fiscal deficit to widen to around 5% of GDP. Nevertheless, we forecast that by end-2020, net general government debt will amount to a contained 34% of GDP, leaving fiscal room to maneuver, despite rising contingent liabilities.

The stable outlook balances the downside economic risks stemming from the coronavirus pandemic over the next 12 months against the resilience of Turkey’s private sector, alongside the still-contained stock of net general government debt.

Last week, the lira collapsed to 7.49 against the US dollar following a steep selloff. The Banking Regulation and Supervision Agency (BRSA) announced that it would restrict foreign investor access to lira-denominated transactions, which immediately targeted BNP Paribas, Citigroup, and UBS AG, to prevent short-selling and speculation.

But global financial markets’ dwindling faith in Turkey goes beyond just foreign limitations. Turkey’s central bank has gone through more than $20 billion from its foreign currency reserves, sending its gross reserves to a two-year low of $86 billion. In addition, Turkey faces approximately $170 billion in foreign currency debt, much of which is held by foreign creditors, and it will be due over the next 12 months.

With a crumbling economy, high unemployment, and weakening business and consumer sentiment, it has been expected that President Recep Tayyip Erdogan would submit a bailout request from the International Monetary Fund (IMF). But he dismissed the recommendations. Instead, Erdogan has requested to join the European Union and reunify the two nations, arguing that they are “all in the same boat” (referring to the coronavirus pandemic).

On the data front, the jobless rate surged to 13.6% in February, before the outbreak shut down the country. The April inflation rate spiked 10.94%, while the producer price index (PPI) climbed 1.28%.

The USD/TRY currency pair tumbled 0.21% to 7.0721, from an opening of 7.0891, at 16:41 GMT on Monday. The EUR/TRY fell 0.42% to 7.6479, from an opening of 7.7764.