Country Report Turkey January 2011

Economic policy: Tax revenue growth holds down the budget deficit

The central government budget continued to perform strongly in October and November, compared with 2009, when the full-year deficit reached 5.5% of GDP. The deficit in January-November 2010 was TL23.5bn compared with TL46.2bn a year earlier thanks to strong tax revenue growth. Three major indirect taxes accounted for 56% of the tax take: on a year-on-year basis, receipts from special consumption tax (SCT), which is charged mainly on petroleum products, transport vehicles, cigarettes and alcoholic drinks, rose by 31%, revenue from value-added tax (VAT) on imports increased by 38%, and domestic VAT receipts rose by 42.1%. These figures reflect partly changes in prices and adjustments in tax rates, but mainly a surge in domestic consumption. Government non-interest expenditure in the same period rose by 11.7% year on year, which represents only a modest real increase after allowing for inflation. Meanwhile, interest expenditure declined owing to the lagged effect of the sharp decline in interest rates in 2008-09. Although the budget deficit often surges in December, the figure for the whole of 2010 looks certain to come in well below both the government's estimate in October of TL44.2bn.

Central government budget
(TL bn unless otherwise stated)
Total revenue209.622.19.9215.122.52.6252.8193.2232.320.2
 Tax revenue168.117.710.0172.418.12.6210.2154.2192.624.8
 Other revenue41.54.410.642.64.52.842.638.939.72.0
Total expenditure227.023.911.3267.328.017.7297.0239.5255.86.8
 Non-interest expenditure176.418.613.6214.122.421.4247.5187.2209.311.7
 Interest expenditure50.75.33.953.
Budget balance-17.4-1.8-52.2-5.5-44.2-46.2-23.5
Primary balance33.
a Revised in October 2010.
Source: Ministry of Finance General Directorate of Public Accounts.

Download the numbers in Excel

© 2011 The Economist lntelligence Unit Ltd. All rights reserved
Whilst every effort has been taken to verify the accuracy of this information, The Economist lntelligence Unit Ltd. cannot accept any responsibility or liability for reliance by any person on this information