OECD has cuts its GDP growth forecast for Turkey for 2014 to 2.8% from a previous 3.8% while it has also slashed the 2015 forecast to 4% from a previous 4.1%.

Growth is projected to remain subdued through mid-2015, while current account deficit will remain very high, the OECD said in the latest issue of its regular Economic Outlook report, published on Tuesday. On the assumption that domestic confidence is restored and international confidence upheld, GDP growth may approach 3% this year and 4% in 2015, the OECD stressed. The OECD expects Turkey’s current account deficit, which stood at 7.9% of its GDP, to narrow to 6.6% this year but to widen to 6.9% of GDP in 2015. The OECD forecasts an inflation rate of 8% this year but says inflation will fall to 6.5% in 2015. High inflation will persist in 2014 as a result of additional pass-through from exchange rate depreciation and indirect tax increases, according to the OECD.

Political tensions have dented confidence, and sustaining domestic and international confidence is crucial, the OECD said. The Organisation also recommends improvement in fiscal transparency with timely general government accounts and comprehensive reporting. Disinflation is crucial to preserve the bulk of recent competitiveness gains and to allow Turkey to benefit more from the projected recovery in global trade, the Outlook report underlined.

The OECD sees further financial market turmoil during the prospective normalisation of US monetary policy and intensifying internal political tensions as two major risks to the Turkish economy. If either of them were to materialise, confidence could falter and tensions arise in foreign funding, the OECD concluded.