Turkey cannot attain 4.5 pct growth goal this year, Simsek warns

A clear admission by the Deputy Prime Minister that the failed July 15 coup has put pressure on the economy

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Turkey cannot attain its goal of 4.5 per cent economic growth this year as downside risks have risen, Deputy Prime Minister Mehmet Simsek said on Friday, the clearest admission yet that the failed July 15 coup has put pressure on the economy.

Investors have been rattled by both the attempted putsch, when a group of rogue soldiers attempted to overthrow the government, and the widening crackdown that has followed with the arrests or dismissals of tens of thousands of people.

Simsek, who is charged with oversight of the economy, had previously said there was a growing risk that output could fall short of the 4.5 per cent target.

Third quarter

“The downside risks to growth, especially in the third quarter, have increased, because no matter how much we try, there have been some fluctuations, uncertainties and changes in the market,” he told broadcaster TRT Haber in a live interview.

"We cannot attain 4.5 percent growth this year."

He also said that Turkey's savings deficit was a "bottleneck" for the economy and that the government wanted the savings rate to increase, as do investors and ratings agencies.

Turkey's savings rate as a portion of GDP is around 15 percent, according to official data, well below the global average of 26 percent.

Credit rating

Investors are particularly concerned about what action ratings agencies could take on Turkey's credit rating in coming months.

Fitch Ratings has a scheduled review of Turkey expected to be released later on Friday. It has said any decision it takes on Turkey's debt will depend on the extent to which the government reaction to the coup deepens political divisions and weakens institutional independence.

Turkey has so far detained around 40,000 people in its investigation following the attempted putsch. It also launched a sweeping purge of the military, civil service, police and judiciary, with nearly 80,000 people removed from public duty.