Turkey's Budget Feels the Pinch as Election Economy Weighs

(Bloomberg) -- A fiscal splurge amid back-to-back elections and tax cuts designed to ease runaway inflation are taking their toll on the Turkish government’s finances.

The central government ran a budget deficit of 18.1 billion liras ($3.32 billion) in December, the Treasury and Finance Ministry said on Tuesday. That takes the annual deficit to 72.6 billion liras, or around 2 percent of gross domestic product, according to Bloomberg calculations based on most recent GDP data.

Turkey's Budget Feels the Pinch as Election Economy Weighs

Key Insights

  • The annual budget deficit was largely in line with the government’s 72.1 billion liras target.
  • Still, it highlights the negative impact that tax cuts announced in October on products ranging from furniture to white goods to cars have had on the budget.
  • Government bodies tend to spend more in December in order to rundown their allowance, adding extra pressure on finances.
  • Receipts from special consumption tax dropped 11.4 percent in December, due to a ceiling imposed on the price of refined oil products earlier in the year.

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  • The deficit excluding interest payments was 16 billion liras in December, down nearly 20 percent from a year earlier. The government posted an ex-interest surplus of 1.3 billion liras in 2018.
  • Tax income fell by 3.8 percent to 45.5 billion liras in December; rose 15.8 percent to 621.3 billion liras in 2018
  • For more on tax cuts and their market impact, click here.

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