May Budget:''In the eve of a virtuous cycle where earlier expenditures will be redeemed as taxes.''

Turkish Economy: May Budget

In the eve of a virtuous cycle where earlier expenditures will be redeemed as taxes.

Turkey recorded a budget surplus of TRY 6,4bn (~USD 1,8bn at current market rates) in the month of May. Total tax collection rose by 7,6%* YoY reaching TRY 51bn. Total receipts were recorded at TRY 57,5bn. Expenditures rose by 4% YoY reaching TRY 47,4bn.

Key Take-aways:

  • As communicated in advance by finance minister Mr. Naci Ağbal, May budget figures showed improvement.
  • Turkish GDP growth rate at 5% means budget multiplier fulfilled its intended function according to theory.
  • Strong economy will attract better tax collection while diminishing the need for expenditures.
  • High roll-over ratio in June borrowings were probably to ease the burden in the following months by moving it forward (cover figure).
  • Over-stated concerns about public finances deemed far-fetched, budget discipline to prevail in the remainder of the year helping the trend to reverse.


Upward trend in tax collection endures. In the month of April we saw tax collection to re-gain its momentum that was further strengthened in May.  Better economic activity will facilitate further tax collection in the remainder of the year.

Budget performance is strongly tied to overall economic activity (Figure 1). Following the referendum a more stable and predictable business environment will keep economy running at a relatively fast pace.

The government aims TRY 598bn revenues for the whole year. So far in five months the government managed to collect TRY 255bn in revenues which seems pretty in line with the target (TRY 255bn in five months implies TRY 612bn for the year).


The social security related initiatives helped unemployment rate to change course. In the month of March (most recent data point) unemployment rate was recorded at 11,5% - a marked improvement of 0,4% year-to-date (Figure 2).

Due to budget multiplier effect the economy gathered steam. Therefore we do not expect the government to hurry in expenditures. The government would opt to preserve budget discipline, the strongest pillar of Turkish economy. Soon, we expect the budget deficit to GDP ratio to peak. We may finish the year at about 2% which would improve towards 1,5% next year (Figure 3).