(MENAFN- Gulf Times) Turkey has lowered its economic growth forecasts for the next three years and painted a gloomier picture of the outlook for inflation, as political uncertainty and unrest in the largely Kurdish southeast weigh on investor sentiment.
The revision came as investors were also digesting the impact of twin suicide bombings in the capital Ankara on Saturday, which killed up to 128 people in the worst attack of its kind in Turkey.
The lira weakened while stocks fell 0.3%, underperforming emerging markets peers, as the attack raised concern about the security of a November 1 parliamentary election.
"This comes at a difficult time for Turkey," Tim Ash, senior CEEMEA desk strategist at Nomura, said in a note to clients, but added that many of the risks in Turkey were already priced in, with investors reducing their exposure in recent months.
The government lowered its forecast for growth this year to 3% from 4, and to 4% from 5 for 2016, in an update of its medium-term programme - its economic strategy paper for the next three years - published over the weekend.
The inflation forecast was revised up to 7.6% from 6.3% for this year and up to 6.5% from 5% for next. Official forecasts for exports were also revised down to $143bn from $173bn this year.
"Such a change in the inflation path would suggest a looser monetary policy stance in the upcoming period. This would be considered negative for the currency," said Erkin Isik, strategist at TEB-BNP Paribas.
Government officials have said the snap election will go ahead in three weeks' time despite security concerns following the Ankara attack.
President Tayyip Erdogan hopes the AK Party he founded will regain the overall majority it had held since 2002, but lost at June elections. The lira stood at 2.9323 to the dollar, having touched a low of 2.9625 overnight and leaving it around 20% weaker so far this year. The lira has recently clawed back losses from a record low of 3.0750 on September 24.
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