Turkey: Budget deficit narrows with increasing tax revenues

According to the September budget data announced by the Ministry of Treasury and Finance; The central government budget, which had a surplus of 40.8 billion TRY in August 2021, had a deficit of 23.6 billion TRY (2.56 billion USD) in September 2021.

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Turkey: Budget deficit narrows with increasing tax revenues

According to the September budget data announced by the Ministry of Treasury and Finance; The central government budget, which had a surplus of 40.8 billion TRY in August 2021, had a deficit of 23.6 billion TRY (2.56 billion USD) in September 2021. The budget had a deficit of 29.7 billion TRY in the same period of last year. As stated in the Monthly Budget Realizations Report, the primary deficit, which was TRY 13.5 billion in September 2020, became TRY 9.5 billion in September 2021. Budget revenues increased by 49.4% to 117.9 billion TRY due to the 159% increase in value added tax revenue between September 2020 and September 2021, while general government expenditures increased by 30.3% to 141.5 billion TRY in the same period. In the same period, general tax revenues increased by 40%, well above the annual inflation of 19.58%, and amounted to TRY 95.6 billion. Non-interest expenditures, on the other hand, increased by 37.9% and reached 127.4 billion TRY in the same period. Interest payments decreased by 13% in the same period to 14.1 billion TRY.

 

When we look at the cumulative data of 2021; In the January – September period, it was observed that the budget had a deficit of 61.1 billion TRY. It is seen that the budget, which had a deficit of 140.6 billion TRY in the 9-month period of the previous year, displayed a more positive outlook compared to the previous year. While there was a primary deficit of 32.8 billion TRY in January – September 2020, a primary surplus of 81.2 billion TRY was realized this year. Budget revenues increased by 35.8% between January - September 2020 and January - September 2021 to 990.6 billion TRY, while budget expenditures increased by 20.9% to 1,051.7 billion TRY in the same period. In the same period, the increase in tax revenues was realized as 39.7% and became 808.4 billion TRY. Non-interest budget expenditures, on the other hand, increased by 19.3% and amounted to TRY 909.4 billion.

 

According to the government's latest economic program, the budget deficit is estimated to equal 3.5% of gross domestic product in 2021. The budget deficit narrowed last month compared to the previous year, as tax collection remained stable and revenue growth outstripped expenditures. In the MTP, a budget deficit/GDP ratio of 3.5% for 2022, 3.2% for 2023 and 2.9% for 2024, which is the end of the program period, is targeted. Although the pandemic effect of last year has lagged behind in terms of budget revenues and expenditures, we are seeing better numbers; We think that macro-prudential measures, especially rising from the increased inflation and consumption, as well as decreased purchasing power, may limit revenues from tax items such as VAT and SCT. At the same time, the increase in the public sector borrowing requirement and the upward pressure on external borrowing costs may have a natural and interest-driven increase in expenditures. Increasing inflation and financial uncertainties have an impact on borrowing costs and maturity structure. This, in turn, has an increasing effect on interest payments compared to previous periods. In particular, we care about the costs that may increase in the future and maturity lengths in Turkey's foreign currency-based borrowing. The Treasury aims to reduce foreign currency borrowing and extend the shortened maturities.

 

Kaynak Tera Yatırım-Enver Erkan
Hibya Haber Ajansı

Turkey: Budget deficit narrows with increasing tax revenues
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