April Budget:"Preference for a wider deficit should not come to the surprise of the market."

Turkish Economy: April Budget

Preference for a wider deficit should not come to the surprise of the market.

Turkey recorded a budget deficit of TRY 3bn (~USD 0,9bn at current market rates) in the month of April. Indirect tax collection rose by 4,7%* YoY reaching TRY 27,8bn. Total receipts were recorded at TRY 53bn. Expenditures rose by 13,2% YoY reaching TRY 52,8bn.

Key Take-aways:

  • 4,7% YoY indirect tax collection reflects a good start to second quarter regarding economic activity.
  • Tax collection continues to trend upwards.
  • After two consecutive months with increases above 15%, pace of expenditures have slowed down to 13,2% YoY.
  • Current policy mix constitutes of tight monetary policies combined with loose fiscal policies – widening of budget deficit as guided.
  • On Wednesday, Mr. Naci Agbal, Minister of Finance will hold a briefing with bank economists and market watchers.


Tax collection still trends upwards. In the months of February and March pace of tax collection lost some momentum which was recovered in April.

In March, value added tax collection had dropped to TRY 1,8bn – a 33% YoY decline. In April value added tax collection rose by 22% YoY compensating for some of the losses.

4,7% YoY increase in indirect taxes helped tax collection rise by 2,2% YoY. In the first quarter tax collection mainly depended on direct taxation which rose by 2,5% YoY compared to only 1,4% YoY growth in indirect taxes.

About two thirds of tax collection depends on indirect taxes which are more sensitive to economic activity. Recovery in indirect tax collection and the maintenance of the upward trend are promising signs (Figure 1).


Inflationary pressures in the economy forced central bank to run a tight policy stance this year. Probably central bank will stick to its tight stance till late in the year only after a lasting pull-back appears in core inflation.

In order to offset the restraining effects of the monetary policy economy management guided the markets well in advance of their preference for looser fiscal policies.

Current transfers especially social security related expenditures to fight the high unemployment rate caused spending to reach above 15% YoY rates in February and March. Finally in April spending slowed down to 13% YoY. Some social security related measures had their deadline in first quarter. In coming months on the back of improving unemployment statistics we expect expenditures to normalize (Figure 2).