However, output grew by a surprisingly strong 4 percent year-on-year in the third quarter and Simsek, appointed economy czar after a November election, forecast that structural reforms would help sustain the momentum in the years ahead. "The goal is to achieve strong and sustainable growth and prosperity, improving the investment environment and promoting technology production," he told a news conference to announce the government's medium-term economic programme.
The three-year policy roadmap, revised each year, showed growth was expected to reach 4.5 percent this year and 5 percent in 2017 and 2018, up from an expected 4 percent in 2015. Simsek, a former finance minister, forecast that geopolitical risks in the region would lessen, along with a recovery in its main trading partner, the European Union, while he expected financial market volatility to ease this year. "Fiscal discipline, increasing growth potential, reducing inflation and the current account deficit are in the forefront of the medium-term programme," he said.
High inflation has become a growing concern for the Turkish economy, with annual consumer prices up 8.81 percent in December, sharply above the government's target of 5 percent. Simsek vowed "very serious efforts" to reduce inflation, focusing on structural measures, and forecast inflation would fall to 7.5 percent this year, 6 percent in 2017 and 5 percent in 2018.
Turkey's current account deficit, one of its major economic challenges, would drop to 3.9 percent as a proportion of GDP this year, then 3.7 percent in 2017 and 3.5 percent in 2018, down from 4.4 percent last year, Simsek said. Data on Monday showed a current account deficit of $2.1 billion in November, slightly above expectations. Simsek also said he expected less pressure on emerging market currencies this year compared to 2015, and that gradual interest rate hikes by the US Federal Reserve would have only limited effect on Turkey.
The lira weakened as far as 3.0450 against the dollar overnight, edging close to a September record low of 3.0750. It crept back to 3.0225 by 1100 GMT. The main share index rose 0.88 percent and the 10-year benchmark bond yield rose to 11.33 percent from 11.12 percent on Friday.