TURKEY SEES 1.5 BILLION DLR DEFICIT IN 1986 Turkey expects a 1986 balance of payments deficit of 1.5 billion dlrs, well over target, but is taking steps to improve its performance in this and other fields, Ali Tigrel, director of economic planning at the State Planning Organisation said. He told Reuters the shortfall was a direct consequence of economic growth of nearly eight pct, up from 5.1 pct in 1985, which he said resulted mostly from a surge in domestic demand. Tigrel acknowledged a need to cut inflation further after a drop of more than 12 points to 24.6 pct in the Treasury wholesale index last year. This year's target of 20 pct "might be attainable but the economic management will have to be careful," he said. Tigrel, whose department produces the annual programme which is central to the government's economic planning, said Turkey's creditworthiness was at risk over the current account shortfall, originally targeted at 695 mln dlrs. "We must alleviate the current account substantially to sustain the creditworthiness that we have managed to secure over the last five years," he added. His comment echoed last October's Organisation for Economic Cooperation and Development report on Turkey, which said Ankara's case for more medium-term financing on better terms would look better if inflation were lower and the current account deficit cut or turned into a surplus. "In 1987 we must reduce the rate of growth in public sector investments, we must reduce the public sector deficit as a percentage of GNP and we must achieve a very visible improvement in the current account deficit," he said. Tigrel said a surge in public sector spending last year was also to blame for the high deficits. Appropriations to government departments had been cut by eight pct since the budget was passed in December and foreign borrowing by municipalities had been restrained. "We are trying make sure that public bodies stick to the investment programme and do not exceed their appropriations," he said. It was hoped to bring the public sector borrowing requirement down to five pct of GNP in 1987 from an estimated 5.6 pct in 1986. More modest GNP growth of five pct for 1987 was also targeted, Tigrel said. Measures were being taken to encourage exports, and production incentives were being considered. "We must try to make sure that more capacity is injected into the Turkish economy in the coming years. The promotion policy is geared to make sure that both foreign investment and local private capital come more into play as far as manufacturing capacity is concerned," Tigrel said. He said the process of structural adjustment of the Turkish economy to free market policies, begun in 1980, was still under way. Trade had been liberalised and a freer exchange rate policy applied, but he acknowledged there was more to be done in a country where the state still dominates industry and the currency is only partially convertible.