Turkey Keeps Up Spending Spree Before Istanbul Election

(Bloomberg) -- Turkey ran a budget shortfall in May compared with a surplus in the same month last year, a sign authorities kept their stimulus in place to buoy the Middle East’s largest economy before a rerun of Istanbul mayoral elections this month.

The central government’s budget deficit was 12.1 billion liras ($2.06 billion), compared with a surplus of 2.7 billion liras in the same period a year earlier. Income rose an annual 2.2% and spending grew over 24%.

Key Insights

• Spending excluding interest payments increased an annual 23.5% to 75.7 billion liras. In the meantime, revenue growth remains subdued as officials try to revive the economy, which exited a technical recession in the first quarter
• Tax income fell 2.3% from a year earlier in May, indicating a significant drop when adjusted for consumer inflation of about 19%
• Turkey’s annualized budget gap rose to 118.7 billion liras in May, bringing the ratio of the deficit to gross domestic product to 3.1%, using the first quarter’s annualized GDP figure of 3.83 trillion liras

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• Turkey extended some tax cuts on consumer goods through June
• Earlier this month, the Treasury posted a cash budget deficit of 14.7 billion liras for May
• “We expect the central government budget deficit to rise to 4.2% of GDP in 2019, wider than the fiscal program assumption of 1.8%,” suggesting that the total financing required by Turkey will reach 295 billion liras, Goldman Sachs Group Inc. economists Murat Unur and Clemens Grafe wrote in a research note dated June 4

--With assistance from Fercan Yalinkilic.

To contact the reporter on this story: Cagan Koc in Istanbul at ckoc2@bloomberg.net

To contact the editors responsible for this story: Onur Ant at oant@bloomberg.net, Paul Abelsky, Taylan Bilgic

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