Turkish growth to miss gov’t targets this year and next

Turkey's economic growth is likely to fall short of government targets this year and next, a Reuters poll showed, as heightened political uncertainty has blunted investment and exports to Europe remain under pressure.

The poll of 24 economists, taken in the past week, showed the economy would expand 2.9 percent this year and 3.4 percent in 2016. That's well below the 4 percent growth the government has forecast for 2015 and the 5 percent it expects for 2016. After several years of strong expansion, Turkey is now among the world's top economies. But growth has slowed recently, slipping to 2.9 percent last year from more than 4 percent in 2013. While Ankara has so far stuck to its official targets, senior government officials told Reuters this month growth could potentially fall to 2 percent this year, reflecting a drop in investment after the June election failed to produce a single-party government.

"Investment appetite will likely remain depressed," said Muammer Kömurcüoğlu, an economist at Is Invest, citing political uncertainty and waning demand for emerging markets in general. "We expect the contribution of investment to GDP growth to remain muted over the next couple of years." The Turkish central bank will announce its latest policy decision later on Thursday but no change is expected until early next year when it will raise its one-week repo rate 50 basis points to 8.0 percent. The ruling AK Party founded by President Recep Tayyip Erdoğan lost its single-party majority for the first time since coming to power in 2002. It now has to find a junior coalition partner or face a snap election, a level of political uncertainty not seen in Turkey since the 1990s. Security concerns have also worsened. A suspected Islamic State suicide bomber killed more than 30 people in the southeastern town of Suruç on Monday, touching off demonstrations from protesters who say the government has in the past supported Islamic State militants in Syria. Prime Minister Ahmet Davutoglu has rejected those accusations. A decline in exports to Europe, Turkey's biggest export market in the midst of a battle to revive weak demand and extremely low inflation, has also weighed on the economy.