By Emre Peker And Yeliz Candemir 

ISTANBUL--Turkey's economy expanded by less than 3% in 2014, missing official targets and settling into a pattern of tepid growth just as the government tries to prevent further weakness before critical June general elections.

Gross domestic product grew by 2.9% on the year to 1.75 trillion liras--or $800 billion at current prices--in 2014, down from 4.2% in 2013, the state-statistics agency said Tuesday.

While the expansion beat a 2.7% forecast in a Wall Street Journal survey, it fell short of the government's 3.3% goal and GDP in dollar terms shrunk 2.8% as the lira slumped 9% against the greenback in 2014. Economic growth was driven mainly by exports, while private investment remained flat near zero for a second consecutive year, according to official data.

"We forecast that growth will accelerate in the second half of this year as both political and financial visibility increases," Finance Minister Mehmet Simsek said in a statement, defending Turkey's performance and saying the country still outpaced its emerging market peers--forecast to grow about 2.7% in 2014. The government expects 4% GDP growth this year, compared with analyst forecasts of about 3%.

The Turkish lira continued its slide against the dollar after the GDP data, weakening 0.25% for the day to 2.61 per greenback, slightly below its 2.65 record low in mid-March. The benchmark BIST-100 stock index shed about 1.7% while two-year government bond yields were flat at 8.77%.

Buffeted by wars in Syria and Iraq across its southern border, weak demand from the European Union that buys almost half of Turkey's annual exports, and financial volatility as investors await U.S. Federal Reserve interest-rate increases later this year, the government has been struggling to rebalance the economy and achieve its targeted 5% annual growth.

Turkey's economy was also hit by a war of words between President Recep Tayyip Erdogan and the central bank over monetary policy, as government officials pressed for lower interest rates to boost growth. The conflict exacerbated a lira selloff, curbing domestic demand in the first quarter of 2015 and threatening an effort to reduce inflation toward the 5% official target from 7.55% as of February.

"Growth remains stagnant at best," said Selim Cakir and Emre Tekmen of Turk Ekonomi Bank AS, an Istanbul-based unit of BNP Paribas. "Slow economic growth in Turkey's main trading partners, lira weakness, and political interference are taking a toll on investment and consumption."

At stake is Mr. Erdogan's pledge to build a $2 trillion economy that joins the world's top-10 in less than a decade. Campaigning for a supermajority for his party in the June 7 elections, Mr. Erdogan is promising to boost annual income per person to $25,000 from $10,000--a long shot given current growth levels.

A landslide victory in June would enable Mr. Erdogan's deputies to single-handedly write a new constitution and hand him broad executive powers. Citing a 12-year track record as prime minister, when Turkey's GDP more than tripled, Mr. Erdogan now seeks to transform the country's parliamentary governance to a U.S.-style presidency, which he says will help him run the nation more effectively, like a corporation.

"If we're going to make Turkey one of the 10 most advanced countries in the world, we need to talk about these, and bring them to life. Turkey paid the price for multi-headedness many times," Mr. Erdogan said. "Turkey would be much more advanced if it was governed by a presidential system."

Turkey's average annual economic growth has slowed to about 3% in the last three years from an average 5% since the governing Justice and Development Party, or AKP, came to power in 2002.

While Mr. Erdogan's earlier years were marked by economic reforms and privatizations that drove investment, credit-fueled consumer spending has characterized growth since the U.S. Federal Reserve and other major central banks flooded markets with cash to fight the global financial crisis that erupted in 2008.

As Turkey grapples with dwindling capital inflows amid Fed plans to resume orthodox monetary policies, the government is poised to pressure the central bank once again to reduce interest rates to help economic growth, analysts say. That is having a negative impact on the lira, driven by concerns that a premature easing cycle will derail Turkey's push to cut inflation.

"Rising growth concerns...will probably revive demands for lower interest rates," said Ilker Domac and Gulktekin Isiklar, Citigroup Inc. economists in Istanbul. "We remain concerned about the negative repercussions of further monetary policy easing."

Write to Emre Peker at emre.peker@wsj.com and Yeliz Candemir at yeliz.candemir@wsj.com

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