Turkey, a candidate to join the European Union, has been trying to boost its international economic profile by pursuing stronger trade ties, particularly to the East, and has sought to protect itself from debt market jitters by overhauling its banking system.

Though it is still heavily reliant on imports of oil and high technologies, Turkey has been able to withstand the debt crisis that has afflicted countries in Europe, notably its neighbor Greece.

Finance Minister Mehmet Simsek said the budget deficit narrowed 63.6 percent in January-March period, to 4.1 billion lira ($2.7 billion) as state income rose 20.5 percent while expenditures climbed only 6.6 percent.

The improvement was remarked upon by Standard & Poor’s, a major rating agency, which on Friday affirmed Turkey’s BB/B rating.

S &P said the country’s outlook remains positive but warned it was still not competitive enough. It said Turkey’s large gross external financing needs represent a “macroeconomic risk,” explaining that “a change in investor sentiment could weigh on economic growth and public finances.”

However, it said that “Turkish institutions are robust enough to manage any sudden reversal in capital inflows.”

S &P said its ratings reflect Turkey’s “strong recovery in GDP growth to just below 9 percent in 2010.”

“We expect the 2011 budget deficit to narrow to at least 2.8 percent of GDP versus 3.7 percent of GDP in 2010 given robust domestic demand and the receipt of extraordinary inflows from lowering the government’s back-interest payments and fines on overdue social security premiums, and other past-due tax liabilities,” Standard and Poor’s said.

Simsek, however, admitted further financial measures might be needed to reduce the deficit further.

That will be key as Turkey’s economic growth is expected to slow to around 5 percent in 2011, still a strong rate by West European standards but almost half last year’s rate.

Meanwhile, the Turkish Statistics Institute said Friday that Turkey’s unemployment rate declined to 11.9 percent in January compared to last year’s 14.5 percent. The number of unemployed people in Turkey is now 3 million out of a total population of 74 million.

The unemployment rate for those aged between 15 and 24 is almost double the nationwide average.