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Turkey slashes growth forecasts in economic plan, lira falls

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Turkey slashes growth forecasts in economic plan, lira falls

Turkey slashes growth forecasts in economic plan, lira falls

Turkey sharply cut its growth forecasts for this year and next on Thursday, but disappointed investors who had hoped for deeper reductions that reflected the fragile state of the economy and a plan to help banks.

Sonia Legg reports.


Turkey slashes growth forecasts in economic plan, lira falls

It's not often investors seek a sharp cut in growth forecasts.

But in Turkey's case they're after a change of direction.

For a decade and half growth has been driven by credit and big infrastructure projects.

So a GDP figure for the year of 3.8 percent instead of 5.5 offered hope to some.

(SOUNDBITE) (English) SENIOR CURRENCY STRATEGIST, RABOBANK, JANE FOLEY, SAYING: "One positive signal that comes from the downward revision in the GDP number is the inference really that the government could be on a less policy accommodative fiscal stance." Government influence over the central bank has also been a concern since Tayyip Erdogan was re-elected President.

The fact that he promptly appointed his son-in-law as Finance minister didn't help.

Berat Albayrak no doubt hoped his latest presentation would allay concerns, especially coming a week after the central bank raised interest rates by more than expected.

(SOUNDBITE) (Turkish) TURKISH FINANCE MINISTER, BERAT ALBAYRAK, SAYING: "We will realise the necessary policies and measures together to ensure economic hardships are overcome.

We are aware of the economy's strong and weak points." But it seems doubts remain.

There's no bad bank plan yet or any proposal to deal with non-performing loans And investors had also hoped for more austerity measures.

It all sent the lira - boosted by hopes ahead of the presentation - back down to virtually where it started.

And that's still 40 percent lower than the currency's value at the start of the year.

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