GDP growth in Turkey is now projected to moderate to 2.6% in 2017 from 2.9% in 2016, reflecting increased capital outflows and a weaker outlook for investment on the back of political uncertainty, the European Bank for Reconstruction and Development (EBRD) said on May 10 in its Regional Economic Prospects report.

In its previous Prospects report, issued in November last year, the bank also cut its 2017 growth forecast for Turkey, reducing it to 3% from the 3.4% anticipated in the May 2016 report.

The weakened outlook for Turkey and the Southern and Eastern Mediterranean (SEMED) region somewhat reflects security and geopolitical risks and the related drop in tourism receipts and investment, the EBRD added in its report. The IMF has already demonstrated the dire effect the big decrease in tourism has had on Turkey's GDP growth.

The economic outlook in the region remains materially affected by terrorism, geopolitical tensions and the refugee crisis. Over the last six months Egypt, Jordan, Russia and Turkey have experienced several terrorist attacks while Syria remains engulfed in a humanitarian crisis.

Emerging market currencies have partially or fully recovered their post-US-election losses against the US dollar, with the notable exceptions of the Mexican and Turkish currencies, the development bank observed. Weak consumption and investment following the attempted military coup in Turkey in July 2016 have compounded problems and have contributed to a weakening of the lira, according to EBRD.

In Azerbaijan, Egypt, Ukraine and Turkey inflation is in the double digits, largely reflecting recent depreciations of the respective currencies.

Last month, the IMF lowered its 2017 GDP growth forecast for Turkey to 2.5% from the 2.9% anticipated in February.