The IMF has added its voice to a chorus of foreign institutions welcoming Turkey's shift toward more policy orthodoxy since May elections, notably aggressively hiking interest rates to rein in soaring inflation.

"The recent actions to raise the policy rate, increase taxes, and liberalise some financial sector measures have reduced risks and lifted investor confidence," the IMF said on Friday after a staff team visit to Turkey on Sept. 25-29.

The comments, after a years-long exodus of investment from the major emerging market economy, come ahead of Central Bank Governor Hafize Gaye Erkan holding her first foreign investors meeting at an International Monetary Fund and World Bank forum in Marrakech this week.

The IMF said Turkey's growth is projected to slow to 3.2% in 2024 from 4% this year. The current account deficit is seen narrowing to some 3.1% of GDP next year from 4.1% in 2023, with annual inflation falling to 46% from 69% over the same period.

"The authorities should build on the current momentum. This requires prioritising disinflation," the IMF said, adding that further rate increases and continued liberalisation of financial regulations was needed.

IMF team head James Walsh said: "The balance of risks is to the downside."

Domestically, the key risk is that the policy shift loses momentum, eroding confidence and leading to increased FX demand and reserve drain, he said. External risks include higher commodity prices, a slowdown in trading partners' demand and global systemic financial instability.

"On the upside, unexpected sources of external financing could materialise, or, should investor confidence recover fully, a virtuous cycle of inflows and a stronger exchange rate could bring down inflation faster than expected," he added.

The comments came after a series of statements from foreign institutions last month.

Ratings agency Fitch raised its foreign currency outlook to "stable" and affirmed its "B" rating on Sept. 8, saying policy change could reduce financial instability.

S&P revised its Turkey outlook to "stable" from "negative" three weeks later. It said the new economic team was "enacting measures aimed at cooling the overheated economy and stabilising the exchange rate without undermining financial and fiscal stability." It affirmed its rating at "B".

The World Bank's Turkey director said last month the economy was heading in the right direction but there was more to do. The bank will double its exposure to Turkey to $35 billion over three years.

Also last month, JPMorgan head of CEEMEA debt capital markets Stefan Weiler said Ankara could tap international bond markets more than once before year-end. There is a "clear normalising path of monetary policy and confidence is also being clawed back by the authorities," he told Reuters. (Reporting by Daren Butler; Editing by Jonathan Spicer)