Turkish budget deficit leapt 70% in 2019 on government spending

FAN Editor

January 15, 2020

By Ceyda Caglayan and Nevzat Devranoglu

ISTANBUL (Reuters) – Turkey’s budget deficit jumped 70% last year as the government boosted spending before local elections in the face of a recession, while aggressive monetary stimulus gave the housing market a big boost heading into the new year.

The deficit was 123.7 billion lira ($21 billion) in 2019, just below a government forecast. One-off contributions, including tapping central bank legal reserves, offset the spending and could make future forecasts hard to meet, analysts said. Once 2019’s economic output is calculated, the deficit is likely to come around the government’s estimate of 2.9% of GDP.

In December alone, the deficit was 30.8 billion lira ($5.2 billion), while the primary budget balance, which excludes interest payments, showed a deficit of 26.59 billion lira, the Treasury and Finance Ministry said.

Ankara said in September that it expected to limit deficits in 2020 and 2021 to 2.9% of GDP https://tmsnrt.rs/36WwbI2, while it expects GDP growth to jump to an ambitious 5%. The economy emerged from recession in 2019 after a currency crisis in 2018.

Haluk Burumcekci, of Burumcekci Consulting, said 2019 revenues had been boosted by central bank profits, transfers from legal reserves, one-off contributions and tax restructurings.

For 2020, he said, “the target of 2.9% does not look realistic without additional measures”.

(Graphic – Turkey aims to stabilise rising budget-GDP ratio: https://fingfx.thomsonreuters.com/gfx/editorcharts/TURKEY-ECONOMY/0H001QXWKBFL/eikon.png)

House sales jumped 48% https://tmsnrt.rs/2qVw9jI year-on-year in December to 202,074, the second consecutive monthly leap.

The central bank has slashed interest rates by 12 percentage points since July to boost the recovery.

Sales with mortgages were up 603.4% in December, the Turkish Statistical Institute said, accounting for around a quarter of total sales.

(Graphic – Turkish house sales jump: https://fingfx.thomsonreuters.com/gfx/editorcharts/TURKEY-ECONOMY-HOMESALES/0H001QXQD9Z1/eikon.png)

Data from Turkish state banks show that mortgage rates dropped to as low as 0.79% in January, nearly half the rate a year earlier.

“Apart from the lower mortgage rates, a sharp decline in deposit rates also supported home sales, with people preferring to invest in housing instead of leaving money in banks,” said Makbule Yonel Maya, general manager of TSKB Real Estate Appraisal.

Deposit rates fell to about 10% in December from 20% at the beginning of last year.

The central bank announces its latest interest rate decision on Thursday at 1100 GMT. In a Reuters poll on Monday, the median estimate was for a rate cut of 50 basis points, with eight out of 21 economists expecting it would keep the rate steady.

In 2019 as a whole, house sales declined 1.9% to 1.35 million, with sharp rises in the latter part of the year compensating for a slump in the first half.

House sales to foreigners climbed 14.7% in 2019 to more than 45,000 houses, the institute said. Iraqi citizens were the biggest buyers of Turkish properties last year, followed by Iranians, Russians, Saudi Arabians and Afghans.

(Additional reporting by Daren Butler and Ezgi Erkoyun; Writing by Jonathan Spicer; Editing by Kevin Liffey)

Free America Network Articles

Leave a Reply

Next Post

3 fisherman dramatically rescued after boat capsizes in 12 foot waves

Rescuers were seen braving the huge waves as they opened the hull with a saw. January 15, 2020, 1:27 PM 3 min read Three fishermen have been dramatically rescued off the coast of Oregon Tuesday night after their boat flipped over and capsized in waves up to 12 feet high. […]