Central government budget posted a deficit in January

Ministry of Treasury and Finance announced the Central Government budget figures for the first month of the year. Accordingly, central government budget posted a 139.3 billion TL deficit in January, an improvement from the 150.7 billion TL deficit posted in the same month last year. Over the past 12 months, the cumulative budget deficit declined to 2.095 trillion TL, or 4.6% of GDP. The government expects the 2025budget deficit to reach 1.93 trillion TL, equivalent to 3.1% of GDP as per the latest Medium-Term Economic Program (MTP).  Unlike the previous year, the primary budget balance (excluding interest payments) recorded a surplus of 23.8 billion TL in January, a notable improvement from the 29.6 billion TL deficit in the same period last year. As a result, the 12-month cumulative primary deficit narrowed to 782.3 billion TL (1.7% of GDP).

In January, budget revenues rose 48.6% YoY to 917.1 billion TL, while budget expenditures increased by a slower pace of 37.6% YoY to 1.056 trillion TL. Taxes reflecting domestic economic activity, such as domestic VAT, saw growth slow to 49.8% YoY. Meanwhile, import VAT increased by 24.4%, and customs duties surged 78.7% YoY. Special Consumption Tax (SCT) revenue, which is a key indicator of domestic demand, rose 38.2% YoY, motor vehicle SCT, up 31.4% YoY, durable goods SCT, rising 25.9% YoY, petroleum and natural gas SCT, increasing 53.9% YoY and tobacco product SCT, showing a modest 25.0% YoY growth. 

Non-interest budget expenditures grew 38.1% YoY, with key factors including health, pension, and social assistance spending, slowing to 34.2% YoY growth, which helped moderate the growth of current transfers to 42.0% YoY. The growth in personnel expenses slowed to 38.0% YoY growth.  Yet the spending on goods and services purchases, accelerated to 71.3% YoY. 

Budget expenditures related to earthquake recovery amounted to 10.4 billion TL in January as tracked from the "Urbanization and Risk-Oriented Integrated Disaster Management" (Şehircilik ve Risk Odaklı Bütünleşik Afet Yönetimi) budget category. For the whole year some 426.3 billion TL is allocated down from last year's 906.5 billion TL. 

As of January, the 12-month budget deficit-to-GDP ratio stands at 4.6%, while the primary deficit is 1.7% of GDP. In the general election year of 2023, the budget deficit reached 5.4% of GDP, its highest level since 2009, before easing to 4.9% in 2024.

The government's plan to slash the budget deficit to GDP ratio down to 3.1% of GDP by end of 2025 appears rather unrealistic for the time being, though somewhere close to 4% looks attainable.