ISTANBUL, Oct 9 (Reuters) - Turkey's economy is expected to grow 3.2 percent this year, below a previous forecast of 4 percent, before growing 4 percent next year, Deputy Prime Minister Ali Babacan said on Tuesday.
Announcing the government's medium-term programme for 2012-2015, Babacan said the government maintained its growth forecast of 5 percent for 2014 and 2015.
COMMENTARY OZGUR ALTUG, ECONOMIST, BGC PARTNERS
"(Inflation) was the biggest deviation in forecasts. The government revised up its 2012 year-end CPI inflation forecast from 5.3 percent to 7.4 percent, which made the central bank's (CBT) quarterly inflation report more interesting. If the central bank increases its year-end CPI inflation forecast from 6.2 percent above 7.0 percent, it should take additional measures...
"However, the Bank continues to keep its effective funding rate low at 5.80 percent.
"The 2012 budget deficit to GDP target of the government was 1.5 percent and now the government revised it to 2.3 percent. The biggest surprise was for the coming three years. For next year, the government was foreseeing a budget deficit to GDP ratio of 1.4 percent, but in the new program we see that the government also revised it up to 2.2 percent.
"It appears that budget balances will remain relatively expansionary compared to previous forecasts. Considering the three elections in the next three years, we think that the new forecasts appear more realistic. Besides, they are still below the related Maastricht criterion of 3 percent."
TIMOTHY ASH, HEAD OF EM, STANDARD BANK
"Remember that this programme covers the next three years when Turkey faces local, presidential and parliamentary elections, plus a likely referendum on constitutional reform. In my mind, given the backdrop of elections, this looks like a prudent and very credible set of targets, and it sends the message, that despite all the noise, Erdogan has still sided with the trusted technos in the cabinet. If the rating agencies buy into this plan, IG status should follow."
GIZEM OZTOK ALTINSAC, ECONOMIST, GARANTI SECURITIES
"A more-than-expected slowdown in growth is resulting with a lower current account deficit to GDP forecast...Forecasts for 2013 are more cautious...The medium-term economic programme is offering a consistent macro frame, but we think especially for the end of 2013 5.3 percent inflation is pretty optimistic."
MARKET REACTION The yield on the benchmark two-year bond fell to 7.64 percent from 7.65 percent before the announcement.
The lira weakened slightly to 1.8143 against the dollar, compared with 1.8119 beforehand.
(Reporting by Seda Sezer; Editing by Nick Tattersall)
Keywords: TURKEY ECONOMY/GROWTH