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Turkey's finance minister has slashed the country's economic growth targets and promised to cut public spending by nearly $10bn as the country tries to rebuild shattered market confidence and find a way out of a currency crisis.
Investors welcomed the decision by Berat Albayrak, who was put in charge of the economy two months ago by his father-in-law, President Recep Tayyip Erdogan, to reduce growth projections to 3.8 percent in 2018 and 2.3 percent in 2019. The previous target was 5.5 percent for both years.
But some were skeptical about the credibility of a proposal to reduce the budget deficit to 1.9 percent of gross domestic product this year and 1.8 percent in 2019. They voiced disappointment, too, over the absence of a strategy to support Turkish banks, which face mounting bad loans.
The Turkish lira suffered volatile trading after the announcement but mid-afternoon was trading at 6.25 to the dollar, almost exactly where it opened on Thursday.
Turkey's currency has lost 40 percent of its value against the greenback since the start of the year. Last month the country was plunged into a full-blown currency crisis after a row with US president Donald Trump compounded investor concern about the country's economic imbalances.
The sliding lira has piled pressure on Turkish corporates burdened with foreign currency debt and the banks that lent them money. It has also sent jitters through other emerging markets amid fears of broader contagion.
Investors have been alarmed at the country's economic management under the leadership of Mr. Erdogan, who has railed against high interest rates and insisted that high growth is a priority.
A surprise decision by the country's central bank to raise sharply interest rates was seen as a welcome sign that Ankara was willing to take steps to rebuild the confidence of international investors.
Although many economists now forecast a recession for next year, the reduced growth targets announced on Thursday by Mr. Albayrak were seen as an important step in building on the rate rise.
"The new economic program is based on more realistic GDP and inflation assumptions," said Alvaro Ortiz Vidal-Abarca, chief economist for Turkey at the Spanish bank BBVA. The plan, he said, showed that the government was willing to accept "lower but more sustainable growth".
Paul McNamara, investment director for emerging market debt at GAM, said it was positive that Turkey had at least recognized that problems needed to be addressed. "They have gone from how do we keep growth going to how do we accommodate a slowdown," he said.
Some, however, were disappointed by the lack of detail on plans for pruning back public expenditure and investment.
The announcement offered few details on how important targets would be achieved, although Mr. Albayrak promised to suspend some of Mr. Erdogan's showpiece infrastructure projects and bring in "more sound public-private partnership practices".
Wolfango Piccoli, co-president of the consultancy Teneo Intelligence, expressed concern about the announcement that the country's Emlak Bank, which specializes in real estate, would be restructured and strengthened to take the lead on financing the struggling real estate sector.
"This suggests that the government is (unsurprisingly) willing to provide more financial support to the beleaguered sector (packed with AKP-friendly firms) rather than forcing the required restructuring," Mr Piccoli wrote in a note to clients.
Mr. Albayrak said banks would undergo "health assessment studies" to "identify [their] financial structure and asset quality", adding that Turkey would respond to the findings with further steps if necessary. Some investors had hoped he would announce the creation of a "bad bank" to transfer problem loans to the state.
The finance minister's presentation, which was delivered in a museum linked to Istanbul's Ottoman-era Dolmabahce Palace, was attended by several groups of international investors from London and New York.
Their response to the statement was mixed.
One visiting investor said the plan did not go far enough. But another said that the "snazzy" slideshow and the decision to invite international financiers showed that Mr. Albayrak and his team were learning after a rocky start in his new job. "Kudos to them — they made an important effort," he said.