Turkey on Wednesday lowered its economic growth forecast for 2014 to 3.3 percent, blaming external factors including the chaos in neighbours Syria and Iraq and increased uncertainty in the global economy.
Turkey's export-dependent economy is being hurt by the near total loss of Iraq as a market as well as the dramatic slowdowns in Russia and Ukraine amid the Ukrainian crisis.
"Our growth forecast for 2014 has been revised from four percent to 3.3 percent," Deputy Prime Minister Ali Babacan told a press conference as he unveiled his government's economic programme for 2015-2017.
"The growth target is a little lower than what we set at the beginning of this year," he said.
"This is because exports with Russia, Ukraine and Iraq have decreased due to geo-political tensions... Unfortunately, the situation in Iraq and Syria is not improving," Babacan added.
Babacan said the government forecast annual growth between four percent for 2015 and five percent for 2016-2017.
He also revised upwards the inflation forecast for the whole of 2014 to between 7.6 to 9.4 percent.
"Our top priority is to fight with inflation," he said.
"We are aiming to bring down inflation to 6.3 percent in 2015 and five percent in 2016 and 2017," Babacan said.He said fiscal policy would continue to be tight until a significant improvement in the outlook for inflation, growth and current account deficit.
He said the government would continue to adopt structural reforms to steer the economy back to strong growth and improve the investment climate.
Reining in the ballooning current account deficit is the second priority, Babacan said, adding that his government would try to reduce the deficit to 5.2 percent by 2017 from 5.7 percent of the gross domestic product expected this year.
The government would have reached its original growth target if external shocks had not emerged, Babacan argued.
- 'More realistic assessment' -
President Recep Tayyip Erdogan -- who ruled Turkey as premier for over a decade -- has been credited with turning around the Turkish economy, with GDP per capita almost doubling since he came to power.
But the chaos in neighbours Syria and Iraq where Islamic militants have seized swathes of territory and a pullback in liquidity by major central banks such as the US Federal Reserve, have hurt its growth more recently.
Babacan said the fragile economic recovery in Europe had also had a negative impact on the outlook.
"The developments in our largest trading partner have an impact on Turkey's economy," he said.Gokce Celik, economist at Finansbank in Istanbul, welcomed the revisions "as they render, especially the short-term projections, more compatible with the realisations.
"But the fragility of eurozone's economic recovery and intensifying geopolitical risks in Turkey's southern border pose significant downside risks on Turkey's export and, consequently, growth performances," he said in an emailed statement.
"Neither of these factors seem set to disappear in the short term."
The Turkish economy sharply slowed to 2.1 percent growth in the second quarter, official data showed in September.
Analysts have already revised their forecasts downward, with the International Monetary Fund (IMF) cutting its 2014 growth forecast for Turkey to 2.3 percent.
In afternoon trading on Wednesday, the Turkish lira was down 0.7 percent to 2.2868 to the dollar. The stock exchange was down 1.95 percent at 72,928.06.