Y.F. Macro Focus: Budget, October 2020: Revised Targets Seem Reachable

In October, Budget gave a deficit of TRY4.9bn

Albeit there was no consensus available for the data, the Treasury’s cash balance, a leading indicator for the data, posted a deficit of TL6.7bn in October, decreasing by TL4.8bn compared to the same period in the previous year. Budget gave a deficit of TRY 14.7bn in Oct.19 (Sep.20: TRY-29.7bn). Accordingly, the budget gave a deficit of TRY145.5bn in 10M20 (10M19: TRY-100.7bn). 12-month rolling budget deficit decreased from TRY178.5bn in September to TRY168.5bn in October (-3.8% of GDP, official target: TL -138.9bn, budget/GDP:-2.9%, revised target: TRY-239.2bn, budget/GDP:-4.9%). Additionally, the primary balance posted a surplues of TRY6.9bn in October (Sep.20: TRY-13.5bn, Oct.19: TRY-8.1bn).

Hence, primary deficit reached to TRY25.9bn in 10M20 (10M19:TRY-12.4bn). 12-month primary deficit decreased from TRY52.2bn to TRY37.3bn (-0.8% of GDP, official target: +0.1bn, 0%, revised target: TRY-101.8bn, -2.1%).


Budget revenues increased by TRY27.4bn YoY, up 27% YoY in real terms, to TRY92.8bn

Tax revenues increased by TRY22bn, 25% YoY in real terms, to TRY76.6bn, while non-tax revenues increased by TRY5.4bn, up by 34% YoY in real terms, to TRY16.2bn. The main drivers on the YoY increases on the tax revenues were collections from Special Consumption Taxes (SCT), Value Added Tax (VAT) and foreign trade. The highest contributions to the SCT collections came from SCT on motor vehicles, tobacco and oil&gas. This outlook could be seen as an indicator of that the economic recovery trend in Q3 continued in the first month of Q4.

Budget expenditures increased by TL17.4bn YoY, up 9% YoY in real terms, to TL97.7bn

Non-interest expenditures increased by TL12.4bn YoY, up 5% YoY in real terms, to TL85.9bn, while interest expenditures increased by TL4.9bn YoY, up 54% YoY in real terms, to TL11.8bn. All items of non-interest expenditures except goods/services purchases recorded YoY increases in nominal and real terms. The key driver of the increasing budget expenditures was current expenditures due to the ongoing need of social security incentives, other transfers to the households and revenue shares of the local administrations.


Revised targets seems reachable for this year

The government revised budget targets with the release of 2021-2023 Medium Term Program. The need of fiscal incentives due to the pandemic leaded to sharp increases on the year-end projections. Accordingly, budget deficit target of 2020 increased from TRY138.9bn to 239.2bn whereas the budget deficit to GDP ratio target increased from 2.9% to 4.9%. The latest figures indicate a TRY145.5bn of deficit in 10M20 and 168.5bn in the last 12-month. Additionally, the primary balance target of TRY+0.1bn (GDP ratio: 0%) revised as TR-101.8bn (GDP ratio: -2.1%). The primary deficit was TRY-25.9bn in 10M20 and TRY-37.3bn in the last 12-month period.

Hence, we could say that the revised figures seems reachable for this year. Also, the recent realizations and trends indicate that the year-end figures could be better than the revised targets. On the other hand, we should note that there are still significant uncertainties on sustainability of the recent recovery trend in the economic and budget outlook. Impacts of a new pandemic wave have started to seen in global recently. Also, the need of economic incentives continue to remain high. We expect that the negative impacts of the pandemic continue in the foreground in the rest of the year at least. Additionally, financial conditions has tightened and loan growth trend has started to normalize recently due to liquidty measurements of the CBRT. Hence, the strong rebound in the economic activity in Q3 could run out of steam in Q4.




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Published By: Atilla Yeşilada

GlobalSource Partners’ Turkey Country Analyst Atilla Yesilada is the country’s leading political analyst and commentator. He is known throughout the finance and political science world for his thorough and outspoken coverage of Turkey’s political and financial developments. In addition to his extensive writing schedule, he is often called upon to provide his political expertise on major radio and television channels. Based in Istanbul, Atilla is co-founder of the information platform Istanbul Analytics and is one of GlobalSource’s local partners in Turkey. In addition to his consulting work and speaking engagements throughout the US, Europe and the Middle East, he writes regular columns for Turkey’s leading financial websites VATAN and www.paraanaliz.com and has contributed to the financial daily Referans and the liberal daily Radikal.