Fiscal Balance in Turkey
Turkey - Fiscal Balance
Government presents more restrictive 2019 budget
In late October, Treasury and Finance Minister Berat Albayrak presented the draft 2019 budget to the parliament’s Planning and Budget Commission, ahead of a likely submission to parliament in December. The budget sets out in more detail the tighter fiscal stance previously signaled in September’s New Economic Plan and, if implemented, should help rebalance the economy and avoid further overheating. However, budgeted spending could well be exceeded, which could in turn weaken investor confidence in the government’s commitment to fiscal prudence and put downward pressure on the lira.
Expenditure is seen at TRY 961 billion, which is up roughly 17% from the estimate for 2018. However, given still-elevated inflation next year, expenditure in real terms is thus set to be fairly flat. Looking at the key categories, spending on wages and transfer payments are set for notable above-inflation increases, with the latter likely due in part to an expected rise in unemployment. The government has instead opted to make savings in the capital budget, which is projected to shrink sharply.
Revenues are seen at TRY 880 billion, also up around 17% year-on-year. Consequently, the government foresees a fiscal deficit of 1.8% of GDP in 2019, unchanged from the projection made in the New Economic Plan. If implemented, the draft budget should help support the lira, which lost significant value earlier this year—partly due to investors’ concerns over excessive fiscal stimulus. However, spending overruns are a significant possibility, particularly given local elections early next year and the fact that 2018 expenditure is expected to markedly overshoot the initial budgeted estimate.
Turkey - Fiscal Balance Data
|Fiscal Balance (% of GDP)||-1.0||-1.1||-1.0||-1.1||-1.5|
5 years of economic forecasts for more than 30 economic indicators.
|Bond Yield||19.67||-0.09 %||May 13|
|Exchange Rate||6.06||-0.85 %||May 13|
|Stock Market||86,283||1.41 %||May 13|
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May 23, 2019
Confidence among Turkish business turned pessimistic in May, with the Real Sector Confidence Index falling to 98.9 from 105.5 in April, which had marked the best result since June 2018.
May 21, 2019
Consumer sentiment among Turks dropped from 63.5 in April, which marked the best result since August 2018, to 55.3 in May, the lowest level since contemporary records began in 2004.
May 14, 2019
Output in Turkey’s industrial sector fell 2.2% year-on-year in March, up from February’s slightly revised 5.0% drop (previously reported: -5.1% year-on-year).
May 13, 2019
Turkey’s current account deficit narrowed from USD 4.7 billion in March 2018 to USD 589 million in March 2019, which marked the smallest shortfall since November 2018 and an improvement from February’s revised USD 739 million gap (previously reported: USD 718 million deficit).
May 7, 2019
Finance Minister Berat Albayrak outlined much anticipated new policy measures on 10 April in the face of a prolonged downturn in the Turkish economy, characterized by sky-high inflation, high unemployment, an elevated corporate debt burden and a rising stock of non-performing loans.