Turkey: Strong increase in fiscal revenues and spending in February

Turkey: Strong increase in fiscal revenues and spending in February

Central government primary balance was TRY 3.5bn in February, significantly lower compared to the surplus of TRY 6.0bn in February 2012. The deterioration in the fiscal balance came despite stronger budget revenues, which increased 18% y/y. On the other hand, non-interest expenditures rose much faster by 34% y/y. The additional spending in February stems from payments to contractors and transfers to social security institution.

On the revenue side, VAT on imports rose by a massive 55%, hinting a rapid increase in imports. Therefore, we are likely to see current account deficit to start to widen in February. Strong imports and high tax revenues also hinted that the rapid credit expansion has finally started to be reflected on hard data.

All in all, we expect budget revenues to remain strong during the remainder of the year in tandem with the increase in domestic demand. In addition, government seems committed with the privatisation programme, despite some delays in motorway-bridge privatisations. Therefore, despite increased spending, we expect the government to reach its deficit target of 2.2% of GDP by the year-end.

Selim Çakır