Turkey: Budget deficit triples as spending nearly doubled

According to the April budget data announced by the Ministry of Treasury and Finance; The central government budget, which had a deficit of 69 billion TRY in March 2022, had a deficit of 50.2 billion lira (3.23 billion dollars) in April 2022. The budget had a deficit of 16.9 billion TRY in the same period of last year. As stated in the Monthly Budget Realizations Report, primary surplus of 1.7 billion TRY in April 2021 became 31 billion TRY in April 2022. Government revenues increased by 75% to 164 billion liras, and when adjusted for consumer inflation, it showed a small increase in real terms, amounting to 70%. Tax revenue increased by 78.6% to 136.3 billion liras in April, compared to 76.3 billion liras in the previous year. Taxes on imported goods increased by 131% to 44.1 billion liras due to the depreciation of the lira by more than 45% compared to the previous year. Looking at the sub-items of tax revenues, the fact that the increase in income tax and corporate tax, which are among the direct tax items, remained below the inflation rate, pointed to a weak side on the revenues side. When we look at consumption taxes, we can say that there is a negative real change in SCT with 85%, above inflation, and in VAT with 20.1%. Expenditures rose to just over 214 billion liras from 111 billion liras a year ago, driven by the increase in current transfers, including payments to the social security system. Non-interest expenditures increased by 111.8% to TRY 195.1 billion, driven by an annual rise of 138% in goods and services, 136% in capital expenditures and 128% in current transfers. While 5.7 billion TRY was transferred to BOTAŞ in the support given to SOEs, it is seen that the capital support given to BOTAŞ since the beginning of the year has reached 58.2 billion TRY. In April, expenditures originating from FX-protected deposits were 4.6 billion TRY, and the financial burden from this channel was 16.3 billion TRY.

When we look at the 2022 cumulative data; It was observed that the budget had a deficit of 19.4 billion TRY in the January-April period. It is seen that the budget, which gave a surplus of 5.9 billion TRY in the 4-month period of the previous year, displayed a more negative image compared to the previous year. While there was a primary surplus of 73.4 billion TRY in January – April 2021, a primary surplus of 84.6 billion TRY was realized this year. Budget revenues increased by 75.1% between January – April 2021 and January – April 2022 to 766.6 billion TRY, while budget expenditures increased by 81.9% to 786 billion TRY in the same period. In the same period, the increase in tax revenues was realized as 78.5% and became 591.4 billion TRY. Non-interest budget expenditures, on the other hand, increased by 87.1% and amounted to TRY 682 billion.

Turkey’s cash budget deficit rose to 43.7 billion liras in April. The deficit in the central government budget increased by 197% in April compared to the previous year as expenditures increased. As of April, both the increase in external geopolitical risks and the slowdown in growth and the deterioration of tax revenues in the context of domestic demand factors began to adversely affect the budget performance. Decreasing real incomes may have a slowing effect on income from indirect taxes in the future. On the other hand, we follow debt restructurings, which are other important stages that affect tax revenues, and tax exemptions to encourage economic growth in certain situations. Increasing inflation and risk cost of the country may increase the interest burden with the effect of increasing borrowing costs and shortening the maturities. In this period, we will observe the effects of measures to be taken and incentives to be given within the framework of expansionary fiscal policies, reducing tax revenues and increasing budget expenditures.

According to the government’s latest economic program, Turkey estimates its budget deficit to equal 3.5% of gross domestic product in 2022. The budget deficit, which was 2.9% of GDP in 2021, is expected to decline to 3.4% of GDP in 2023 and 2.6% in 2024 in the MTP. We are in our budget deficit / GDP expectation with the government’s regulation of income tax brackets in order to preserve the purchasing power of individuals affected by exchange rates and high inflation, while the government wants to maintain growth balances, the scale mobile system in SCT, VAT reduction in food, natural gas subsidies and various tax campaigns. We foresee a rate of 4.6% for this year. The need to finance the currency-protected deposit product will also determine the budget performance.

Kaynak Tera Yatırım-Enver Erkan
Hibya Haber Ajansı