September 20, 2018 / 9:09 AM / 3 months ago

UPDATE 1-Turkey slashes growth forecasts for 2018, 2019 in economic plan, lira falls

(Adds growth data, background, lira)

ANKARA, Sept 20 (Reuters) - Turkey sharply cut its growth forecasts for this year and next in its new medium-term economic programme on Thursday, amid a deep currency crisis that has seen the lira fall by 40 percent this year.

Data in finance minister Berat Albayrak’s presentation showed growth was expected to be 3.8 in 2018 and 2.3 percent in 2019, both revised down from previous forecasts of 5.5 percent.

Sources had said Turkey would cut its economic growth estimates, although they had said there was debate among top government officials about the extent of the revisions.

That discussion underscored the delicate balance between President Tayyip Erdogan’s long-standing emphasis on credit-fuelled economic expansion and investors’ calls for greater austerity.

Albayrak, Erdogan’s son-in-law, had previously promised “realistic macro targets” and “right action plans”.

The lira traded beyond 6.27 after the programme was announced, from around 6.20 beforehand and a close of 6.2541 on Wednesday.

The currency has been hit by concerns over Erdogan’s influence over monetary policy. A diplomatic row between Ankara and Washington over the trial of a U.S. evangelical pastor in Turkey has added to pressure on the lira.

The central bank hiked interest rates by 6.25 percentage points last week in a bid to tame double-digit inflation and put a floor under the lira. The currency had made moderate gains since then.

Investors want to see signs the government is moving away from a decade and a half of growth driven by credit and big infrastructure projects. (Reporting by Ezgi Erkoyun and David Dolan; Writing by Tuvan Gumrukcu; Editing by Daren Butler and Toby Chopra)

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