Turkey seeks to improve 2021 budget as 2020 gap below target

Turkey’s government has managed to save around TL 66.5 billion ($9.5 billion) in 2020, Treasury and Finance Minister Lütfi Elvan said Monday, citing budget balance figures that beat the year’s target.

“We will never compromise on fiscal discipline, except for fight against the COVID-19 pandemic,” Elvan wrote on Twitter.

The government’s budget balance posted a TL 172.7 billion deficit in 2020, below the target of TL 239.2 billion that was projected in the new economic program, announced last September, according to Treasury and Finance Ministry data.

Budget revenues last year reached over TL 1 trillion, while expenditures hit TL 1.2 trillion.

Elvan stressed that fiscal policies will continue to be in line with anti-inflationary policies.

“We are taking permanent measures to improve the 2021 budget,” he tweeted, sharing that the government’s target for the 2021 budget deficit is 3.5% of the gross domestic product (GDP).

Announcing budget balance figures Friday, President Recep Tayyip Erdoğan said if the growth target for 2020 is achieved, the budget-deficit-to-GDP ratio would hit 3.6%, beating the mid-term program target.

The country’s GDP roared to a more-than-expected 6.7% growth rate in the third quarter, after contracting by 9.9% in the previous three months when lockdowns were imposed to curb the initial COVID-19 wave.

According to the new economic program, Ankara projects 2020 growth to come in at 0.3%. It expects a rebound of 5.8% in 2021.

Despite a year-on-year budget deficit rise in 2020, the government is aiming for a permanent improvement in the figure, Erdoğan said.

“We are speeding up structural measures in combating the current account deficit,” the president noted.

He also emphasized that Turkey aimed to lower its deficit-to-GDP ratio to 3.5% this year. The deficit was TL 123.7 billion in 2019, up from TL 72.6 billion in 2018.

“We will make no concessions on fiscal discipline,” Erdoğan said.

“Our macroeconomic policies will ensure a balanced demand and sustainable growth,” the finance minister said.

Under the country’s new economic program announced last September, the government expected to see a 4.9% budget-deficit-to-GDP ratio in 2020.

In 2020, the budget balance excluding interest payments saw a deficit of TL 38.8 billion.

Tax revenues stood at TL 833.1 billion, while interest payments last year totaled TL 134 billion.

In December, the budget balance posted a gap of TL 40.7 billion. Budget revenues reached TL 97.6 billion last month, a 34% rise from the same month in the previous year.

Budget expenditures hit TL 138.3 billion, up 32% compared with December 2019.

Excluding interest payments, the government budget balance saw a gap of TL 35.8 billion last December.

External assets at $228.6B

Separate data by the Central Bank of the Republic of Turkey (CBRT) Monday showed Turkey’s external assets amounted to $228.6 billion at November-end, down 9.7% from 2019.

The country’s liabilities against non-residents during the same period rose 2.6% to $614.5 billion.

The net international investment position (NIIP) – the difference between external assets and liabilities – was minus $385.9 billion, versus minus $345.8 billion over the same period in 2019.

As a snapshot in time, the NIIP, which can be either positive or negative, is the value of overseas assets owned by a nation, minus the value of domestic assets owned by foreigners, including overseas assets and liabilities held by a nation’s government, the private sector, and its citizens.

Reserve assets, a subitem under assets, were $82.7 billion at the end of November, down 21.8% from the end of last year.

Other investments, another subitem under assets, totaled $90.7 billion, also indicating a fall of 4.6% in the same period.

“Currency and deposits of banks, one of the subitems of other investment, recorded $44.2 billion, indicating a decrease of 6.9% compared with the end of 2019,” the central bank said.

On the liabilities side, direct investments-equity capital plus other capital, as of the end of November, were $197.1 billion, up 20.5%, including the effects of changes in market value and foreign exchange rates.

Non-residents’ foreign exchange deposits were $32.6 billion, down 5.4% in November versus the end of 2019.

The central bank added that Turkish lira deposits rose 8.8% to $14.8 billion. It said the banks’ total external loan stock amounted to $63 billion – down 7.4% – and the total external loan stock of the other sectors was $95.2 billion, down 3.2% over the same period.

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