Full-year growth was 8.5 percent, as expected in a Reuters poll, Monday's Statistics Institute data showed - broken down over the year with annual expansions of 8.4 percent in the third quarter, 9.1 percent in the second and 11.9 percent in the quarter. 

"The fourth quarter figures show that the soft landing process is continuing in line with targets in a balanced way," Finance Minister Mehmet Simsek told Reuters in a statement, reiterating a government forecast of 4 percent growth this year. 

Growth is expected to have slowed sharply at the start of this year against a background of global economic weakness, but Simsek forecast a subsequent recovery. 

"Even if a slowdown is expected in the first quarter, leading indicators and expectations surveys on the second quarter point to a recovery in the economy," he said. 

The late-2011 slowdown showed private consumption moderating from double-digit growth rates at the start of the year, adding weight to expectations of a narrowing of the large current account deficit.  

"There is some evidence of rebalancing of the economy which is encouraging," said Royal Bank of Scotland economist Timothy Ash. 

"I think the central bank will be happy with these numbers, but the question still is, is the rebalancing happening fast enough, given the backdrop of high oil prices," he added. 

Since late 2010, Turkey's central bank has run a complex policy mix designed to defend the lira currency and keep a lid on inflation as well as hacking away at the deficit.

The policy is based on daily injections of lira funding, a flexible corridor between base lending and borrowing rates and high bank reserve requirements coupled with a low policy rate.   

There was little market reaction to Monday's data. The lira stood at 1.7802 against the dollar after the data compared with 1.7820 beforehand. The benchmark May 15, 2013, bond yield eased to 9.35 percent from 9.37 percent earlier. 

FROM: REUTERS