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Turkey: fiscal deterioration may add more pressures on the Turkish lira!


  • Overall revenues in January 2019 rose to TKY 97 bn due to the Central Bank of Republic of Turkey's decision to pay profit (TKY 37bn) early in the month. This drove the impressive uptick in the charts below. But regarding single month revenues figures then they are more in line with seasonality: February was TKY 67bn, March TKY 54.4bn and April TKY 57.7bn. Compared to the same period last year, revenues increased by almost 20% in the first fourth months. However, excluding January of the sample showed that revenues have been almost flat.
  • We have already mentioned several times, the risk of fiscal slippage due to populist measures in the run-up of the elections in Q1. On the first fourth months, expenditures raised by around 30% compared to last year. Even though excluding January’s data (the pick of fiscal expansion), the increase in expenditures has been substantial: 20%.
Graph-Central-Gov-Revenues - Graph 1


  • Year to date, the Central Government Deficit has reached TKY 55 bn i.e its level of September 2018. With elections in Istanbul planned for June 23rd, the probability of a sharp decrease in expenditures in May/June is low.
  • With weak growth expectations and tax cuts, we do not expect the revenues to increase substantially. The unusual increase in revenues due to the CBRT profit transfer in January might be repeated soon (the government is working on a proposal on how to transfer the "legal" reserves of the CBRT – i.e. the accumulated past profits – to the state budget). It would again help to limit the rise in the deficit but will not be enough to stabilize it at its level of 2018.
Graph-Central-Gov-Revenues - Graph 2
  • While political and geopolitical uncertainties are weighing on markets and on TKY, deteriorating growth, tax cuts, and higher expenditures worsen fiscal outlook and increase the vulnerability of Turkey and the risk’s perception. The Turkish lira has depreciated by 15% since the beginning of the year but we cannot exclude that it goes further down.


HERVE Karine , Emerging Markets Senior Economist
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Turkey: fiscal deterioration may add more pressures on the Turkish lira!
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