Turkey: Budget reaches the highest deficit this year

According to the September budget data announced by the Ministry of Treasury and Finance, the budget ran the biggest monthly fiscal deficit of this year with 78.6 billion liras (4.2 billion dollars) in September 2022. In August, the budget had a surplus of 3.6 billion liras thanks to the increase in tax revenues. The budget had a deficit of 23.6 billion TL in the same period of the previous year. The primary deficit, which was TL 9.5 billion in September last year, expanded to TL 45.5 billion in the same month of 2022.

As stated in the Monthly Budget Realization Report, State revenues decreased compared to the previous month in September and increased by 75.5% compared to the same period of the previous year and reached 206.9 billion liras. Tax revenue increased by 81.4% compared to the previous year and reached 173.4 billion. Looking at the sub-items of tax revenues, value added tax (VAT) on imports showed the highest increase with 161.6%, banking and insurance transactions tax increased by 119.1% and special consumption tax (SCT) increased by 105.9%. Corporate tax revenues decreased sharply from 366.5 billion liras last month to 4.9 billion liras. The income tax increase was 83.3%, slightly below the inflation rate.

In September, central government budget total expenditures increased by 101.8% compared to the same month of the previous year and reached 285.6 billion TL. Non-interest expenditures increased by 98.2% year-on-year, slightly slower than cash-based results, amounting to TL 252.4 billion. Expenditures on wages increased by 96.2% monthly to 61.4 billion liras. In September, interest expenses increased by 134.7% compared to the same period of the previous year. In this period, while the expense arising from capital transfers was 88.4%, the lending item increased by 391%. In this item, the debt of 18 billion TL given to BOTAŞ was effective in the high increase. While expenditures within the scope of FX-protected deposits remained at the level of 9.3 billion TL, capital transfers item decreased by 40.5%.

When we look at the 2022 cumulative data; January-September budget deficit was 45.5 billion TL. The budget posted a deficit of 61.1 billion TL in the January-September 2021 period. While there was a primary surplus of 81.2 billion TL in the January – September 2021 period, a primary surplus of 161.1 billion TL was recorded this year. Between January - September 2021 and January - September 2022, budget revenues increased by 99.4% to 1,975.3 billion TL, while budget expenditures increased by 92.2% to 2,020.8 billion TL in the same period. In the same period, the increase in tax revenues was realized as 103.8% and was 1.648 billion TL. Non-interest expenses, on the other hand, increased by 99.4% to TL 1,813.6 billion.

Ratio of budget and primary balance to GDP (12-month cycle) Source: Ministry of Treasury and Finance, TurkStat, Tera Yatirim

The central government budget ran a deficit in September due to increased expenditures and low corporate tax revenues. With this composition, we calculate that the budget performance will decline slightly due to the slowdown in revenues and the high course of expenditures to be seen in the coming months. The increases in the import bill due to both product prices and exchange rate increases are positive in terms of import taxes, whereas the slowdowns in VAT and corporate tax revenues from domestic consumption are negative. The general decrease in consumption may cause a loss of momentum in both VAT and SCT revenues.

Under the Medium Term Program (MTP), announced earlier this month, the government foresees a fiscal deficit that will close the year with 3.4% of gross domestic product. Considering that the budget performance in the first 8 months of the year gave a surplus, it is understood that budget expenditures will increase within the framework of the factors we mentioned while entering the elections planned to be held in the middle of 2023. In the 2023 budget draft, it is seen that the government will increase its “energy supply security, efficiency and energy market” expenditures by 155% to 406.5 billion liras (approximately 22 billion dollars) in 2023. In 2023, the burden of energy subsidies on the budget is seen as 600 billion liras. While social aid expenditures increased by 73% to 258.4 billion liras, interest expenditures of 565.6 billion liras are expected next year.

Kaynak: Tera Yatırım-Enver Erkan
Hibya Haber Ajansı