Tax cuts and other incentives recently announced by the Turkish government to support industry, with the aim of countering the country's gaping current account deficit, will cost around 2.1 billion lira (0.7 billion pounds) a year, Finance minister Mehmet Simsek told Reuters on Thursday.

We calculated the annual cost of the new incentives system, to take effect from January 1, 2012, at 2.05 billion lira, Simsek said.

The government announced a new incentive scheme earlier this month to encourage companies to buy locally produced goods instead of imports and to boost Turks' low savings rate to reduce the country's dependence on foreign capital inflows to support its growing economy.

The current account deficit is seen as Turkey's main economic weak point in an otherwise booming economy. The current account deficit stood at 10 percent of GDP in 2011 or $6.6 billion in December although it is expected to decline to 8 percent this year as the economy slows.

The incentives include tax cuts, VAT (value-added tax) exemptions and other encouragement for large, strategic and regional investments.

Priority has been given to investments in sectors such as aerospace, defence and automotives.

Policymakers announced this week measures to boost domestic savings. They were mainly directed at private pension systems but also included introducing real estate taxes for different cities and adjustments in the withholding tax on bank deposits to encourage depositors to opt for longer maturities.

The government has also announced a 100 lira tax on every mobile phone imported into Turkey from abroad, in a move seen raising 100 million lira a year, Simsek said.

Changes were also made to a tax rebate system on rental income to reduce the number of exemptions for landlords, Simsek said.

The annual revenue from cancelling exemptions of rent income tax for high income groups is expected to be 200 million lira, Simsek said.

(Reporting by Orhan Coskun, Writing by Ece Toksabay; Editing by Susan Fenton)