Turkey’s Q1 Budget Deficit Drops by 63,6 Percent

Turkey’s budget deficit in the January-March period dropped by 63.6 percent over the same months of 2010 to TL 4.1 billion, Finance Minister Mehmet Şimşek announced on Friday. The budget deficit in the first quarter of 2010 was TL 11.3 billion.

Following a 25 percent year-on-year reduction in its budget deficit in 2010, Turkey maintained a recovery in this field with a drastic 63.6 percent drop in the first quarter over the same months of a year before, the latest data reveal. The government expects to minimize budget spendings while boosting revenues in the coming months

Speaking to reporters in Ankara on Friday, Şimşek said the latest results were proof that the government has maintained its adherence to strict budgetary discipline and did not make extra expenditures as part of a traditional “election economy” in Turkey. Past governments spent more ahead of elections than they normally do in the hopes that the new investments would result in an increase in votes.

“This is indeed a very strong budgetary performance, which shows that the government made no concessions on budgetary discipline even in an election year,” Şimşek said. Turkey is set to go to the polls for general elections on June 12. He added that the results also indicated that the government’s targets for 2011 were “realistic and achievable.”

Along with its contracting budget deficit, Turkey’s noninterest budget surplus — the figure calculated when all interest expenses are assumed null — grew twofold in the first quarter over the same period of 2010. The minister cited some agricultural debts which the state has outstanding as the major factor for the increase in the noninterest budget surplus.

The good news on contraction in the budget deficit comes on the heels of recently announced gross domestic product (GDP) growth. Turkey’s economy achieved 8.9 percent growth last year over a year before, having recorded a strong comeback from the 2009 global financial turmoil.

Turkey’s budget revenues in January-March of this year registered a strong growth of 20.5 percent over the same quarter of 2010 to reach TL 68.7 billion. Budget expenditures, however, increased by 6.6 percent to TL 72.9 billion in the same period. The country earned 19.9 percent more from taxes in January-March of this year than it did in the same months of last year. While tax revenues in the first quarter stood at 57.5 percent, non-interest expenses reached TL 58.9 billion, representing a 10.3 percent rise over the same months of 2010.

When looking at March alone, Turkey’s budget deficit in this month jumped slightly by 2.8 percent over the third month of a year before and reached TL 6.1 billion. In other encouraging figures, tax revenues in the first quarter covered 97.6 percent of non-interest expenses while this figure was 89.8 percent in the same period of 2010. The state spent TL 72.85 billion from its coffers in January-March of this year while the highest increase in expenditures was made in social security premium payments for civil servants, with 20.1 percent over the same months of 2010. The state, however, spent 2.8 percent less on health services in the given period. The state also spent TL 2.8 billion on agricultural incentives in the first quarter.

While continuing its fight against unemployment and inflation — amid aftershocks of the 2009 crisis — Turkey was able to reduce its budget deficit last year. The country’s budget deficit saw a 25 percent year-on-year reduction and was realized below all expectations at the level of $39.6 billion in 2010. The country faces a challenge to keep its national spending under control in the months to come.

Reading between the lines of the latest growth data, public investments had only a minor impact on Turkey’s growth by only 8 percent while the private sector seems to have shouldered the responsibility to drive the country’s economic expansion. Since it came to power, the ruling Justice and Development Party (AK Party) has intensified its quest to accelerate the privatization of state enterprises as part of efforts to encourage private industry to take a more active role in Turkey’s growth.

16 April 2011, Saturday / ALİ ASLAN KILIÇ , ANKARA