Turkey’s risk premium in international markets saw a significant fall after its president promised to back up market-friendly policies in the upcoming period.

In less than a week, the country’s 5-year Credit Default Swap (CDS), which is one of the main indicators of risk premium, declined by 135 basis points, from 528 to 393, the lowest level since March.

On Wednesday, President Recep Tayyip Erdoğan announced a series of new economic plans that will enable an improved investment climate for foreign investors backed by an efficient judicial system.

His remarks on the government's new economic path, which will ensure free-market protection, were welcomed by financial markets, resulting in a big appreciation in Turkish assets.

The U.S. dollar/Turkish lira exchange rate fell rapidly on Wednesday as Erdoğan vowed to make structural reforms to improve the investment environment, increasing transparency and credibility in the economic policies.

Also, the lira gained 4.6% against the dollar on Wednesday while Turkey's benchmark stock index hit an all-time high, increased 2.91% to see 1,284.62 points.

The lira further strengthened on Thursday and gained as much as 1.33% to trade at 7.69 against the dollar at 8 p.m. local time.

"During the pandemic period, the financial institutions had introduced a series of regulations that increased foreigner's risk perception," according to Erhan Aslanoğlu, a professor of economics at Istanbul-based Piri Reis University.

He said at a time when there's a huge amount of money with low-interest rates, investors would want to invest in markets where there are less regulation and risks.

"This is one of the main reasons why we saw significant drops in CDS, as investors' perception changed with the new market-friendly steps announced yesterday."

He also added the expectation that the Central Bank of the Republic of Turkey (CBRT) is likely to introduce tight monetary policies in line with market expectations also caused a decline in the country's risk premium.

Former Finance Minister Naci Ağbal was named the CBRT governor Saturday and former deputy Prime Minister Lütfi Elvan was named finance minister late on Monday.

Former Treasury and Finance Minister Berat Albayrak resigned late Sunday, citing health concerns and Erdoğan officially accepted his resignation Monday.

Ağbal said Monday the bank’s main goal is to achieve and maintain price stability and it will "decisively" use all policy tools in pursuit of this aim. He said current financial situations and expectations will continue to be reviewed until the central bank's next policy meeting, set for Nov. 19.

In the new era, Turkey will be holding a series of meetings with international investors to talk about opportunities, potential and support the country will extend to them.

Also, steps are to be taken in the coming months to strengthen the rule of law and the judicial system.