Turkey's economic growth this year may miss the government's 4 percent target despite better-than-expected growth in the second half, Economy Minister Nihat Zeybekci said on Friday, echoing a warning from the finance minister two days ago. Gross domestic product (GDP) grew 2.1 percent year-on-year in the second quarter, according to data released on Wednesday, missing forecasts and raising questions about the 2014 target.
Zeybekci has been a vocal critic of the central bank's tight monetary policy, calling for sharper interest rate cuts despite stubbornly high inflation. He told Reuters in an interview last month that the central bank's core mandate for price stability should be expanded to include employment and growth, although he said this would not be an immediate government priority.
Turkey's central bank governor set out his case against the sharp cut in interest rates on Thursday, mirroring Zeybekci's comment that growth would pick up towards the end of 2014. Since an emergency rate hike in January, which saw the main one-week policy rate more than doubled, the bank cut the one-week repo rate by 175 basis points in three months, fanning criticism from some economists that it was caving in to political pressure despite persistent inflation.
Last month it unexpectedly lowered its overnight lending rate in a move seen as having little easing impact and intended more as a signal to the government that it is supporting the economy. Zeybekci, speaking in a televised statement, also said he expected to see a pick-up in domestic demand in the final quarter of 2014 due to accelerating loan growth.
However, he said that the ministry is working to reduce imports and that he expects the current account gap, seen by analysts as Turkey's main economic weakness, to narrow to $45 billion in 2014 from $65.06 billion in 2013. The lira was little changed by Zeybekci's comments, easing to 2.2040 against the dollar by 0842 GMT from 2.1960 on Thursday. Istanbul's main share index was up 0.23 percent at 79,160 points while the benchmark 10-year government bond yield rose to 9.29 percent compared with 9.15 percent at Thursday's close.
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