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Turkey's Erdogan targets inflation, state finances in economic reform plan

ISTANBUL (Reuters) - President Tayyip Erdogan said he would focus efforts to reform Turkey’s economy on bringing down double-digit inflation and tightening state finances, under a keenly awaited package he unveiled on Friday.

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Erdogan, whose has led a major emerging economy prone to booms and busts for 18 years and repeatedly declared his opposition to high interest rates, announced plans to set up price, financial stability and economic coordination committees to steer the changes through.

“An agenda point of priority is the battle with inflation. The goal is single-digit inflation,” he said, adding that an “early warning system” was being developed for food prices.

With inflation pushing above 15% and the lira having lost half of its value since 2018, markets had been eagerly anticipating details of the programme, and the currency trimmed earlier losses as Erdogan spoke.

A survey on Friday showed inflation forecasts continuing to rise, reinforcing predictions of tighter monetary policy. A Reuters poll forecast the central bank will raise its policy rate by 100 basis points to 18% at its next meeting on March 18.

Erdogan, who made no reference to interest rates in his speech, also said his government would increase Turkey’s potential growth through productivity, driven by investment, employment and exports.

“We will ... aim for a national and domestic economy where imports are lowered, and with added-value exports,” he said.

Erdogan also announced the formation of a bond guarantee fund to support company bond auctions and said state-backed loans will be offered to small business hiring additional employees.

In a package he said was drafted in consultation with the private sector and non-government organisations, Erdogan said tax policies will be simplified, taking into account issues raised by international investors.

The lira stood at 7.5800 against the dollar at 1450 GMT, , 1.5% weaker on the day but slightly firmer than the 7.5940 level before Erdogan spoke.

Additional reporting by Jonathan Spicer; Writing by Daren Butler; Editing by Ece Toksabay and John Stonestreet

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