ANKARA
Turkey has downgraded its year-end growth forecast to 3.3 percent, Deputy Prime Minister Ali Babacan said on Wednesday during an announcement about a new medium-term economic program.
Babacan said that the government’s forecast for 2014 was a 0.7 percentage point lower than the previous target. The growth forecast for 2015 was cut from 5 percent to 4 percent; a 5 percent growth target for 2016 was maintained.
A stronger-than-expected economic performance from Turkey in the first quarter of the year saw many international institutes upgrade the country’s growth outlook.
However, worries of a possible weakening in exports – the economy’s main driving force – due to increased geopolitical tension in Iraq and shaky growth in the EU has loomed over Turkey’s economy and forced officials to revise their targets.
In Wednesday’s new medium-term economic program, the state envisages a 5.7 percent current account deficit to GDP ratio at the end of 2014 and aims to cut this down to 5.2 percent in 2017.
A year-end inflation forecast was upgraded to 9.4 percent from 5.3 percent in the previous medium-term economic program while a target of 5 percent for next two years was preserved, suggesting the Central Bank will continue to maintain tight monetary policy.
Markets have closely observed inflation figures for months since the Turkish Central Bank vowed to maintain high interest rates until it noticed clear signs of recovery in the inflation outlook.
However, some government officials have repeatedly complained that high interest rates were suppressing economic growth.
“We forecast inflation to fall to 6.3 percent next year and we maintain a 5 percent inflation target for 2016 and 2017,” Babacan said.
The new program forecasts US$10,537 GDP per capita at the end of 2014 and US$12,229 at the end of 2017.
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