Macro View: Central Government Budget – October 2022 (Gedik Yatırım)

Central government budget posts a TL83bn deficit in October. In October, the central government budget posted a TL83.3bn deficit compared to the TL17.4bn deficit in the same month of last year. There was a TL22.1bn primary deficit vs. the TL3.1bn primary deficit of October 2021. The primary deficit figure increases to about TL29bn when adjusted for the IMF definition, i.e., when one-off items are excluded.
 
Although the FX protected deposit scheme payments and transfers to SEEs have slowed down, widening in current expenditures is noteworthy. In October, there seems to be a 13% YoY increase in non-interest spending in real terms, which outpaces the mere 2% YoY rise in tax revenues (both adjusted by CPI inflation). The YoY increase in current transfers is more severe at 27%, which to a large extent is attributable to contractor-based payments. Budgetary transfers for the FX protected deposit scheme eased to TL6.7bn, which brought the y-t-d transfers to TL 91.6bn. Note that transfers through the CBRT is not documented in the Central Government Budget. Total transfers to SEEs (including lending) have also eased to TL9.7bn in October (e.g., it was TL51bn in August), of which TL6.5bn pertaining to BOTAS, the state natural gas distributor. Total transfers to SEEs have reached TL189bn y-t-d, of which TL126bn was for BOTAS. Note also that the latest medium-term program (MTP), released on 4-Sep, projects the combined budget deficit of SEEs at TL430bn compared to the initially foreseen TL20bn.
 
12-month rolling budget deficit to GDP ratio still stands below 2% of GDP, although is expected to rise to about 3% by year-end. In 1H22, the inflationary environment and robust growth outlook had led to strong tax collection, which along with the constraint in non-interest expenditures helped the fiscal performance and kept the budget deficit to GDP ratio below 1.0% of GDP. Yet, the budget performance has deteriorated since July, due to the slowdown in tax collection and the surge in non-interest expenditures. Despite this deterioration, budget deficit for the Jan-Oct period has reached TL129bn, which implies only a limited rise compared to last year’s TL79bn (in fact points to an improvement in real terms). On a 12-month rolling basis, budget deficit stands at TL243bn, which is about 1.7% of projected GDP. The primary balance has posted a TL50bn surplus over this period, which after the IMF-definition adjustments turns to a deficit of TL121bn. As such, although the budgetary performance may deem to be benign as of October, we expect the deterioration in fiscal performance to get more pronounced going forward, more particularly through rising non-interest expenditures. Note that the government in the latest medium-term program (released on 4-Sep) revised its budget deficit projection for 2022 significantly to TL461bn from TL278bn, which is close to our TL440bn forecast. This means that we will witness a severe budget deficit in the last two months of the year (budget deficit may reach about TL300bn in December alone). Yet, the revised figure would actually point to roughly 3.1% of GDP, which is within the government’s 3.5% limit. That said, we believe that a budget deficit/GDP ratio heading towards 4.0% or above still remains as a considerable risk for the accompanying years, particularly due to the rising interest expenditures and potentially significant FX protected deposit scheme-related expenses.

 
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                               Yasal Uyarı
 
 Burada yer alan yatırım bilgi, yorum ve tavsiyeler yatırım danışmanlığı kapsamında değildir.Yatırım danışmanlığı hizmeti ; aracı kurumlar, portföy yönetim şirketleri, mevduat kabul etmeyen bankalar ile müşteri arasında imzalanacak yatırım danışmanlığı sözleşmesi çerçevesinde sunulmaktadır.Burada yer alan yorum ve tavsiyeler, yorum ve tavsiyede bulunanların kişisel görüşlerine dayanmaktadır.Bu görüşler mali durumunuz ile risk ve getiri tercihlerinize uygun olmayabılır.Bu nedenle, sadece burada yer alan bilgilere dayanılarak yatırım kararı verilmesi beklentilerinize uygun sonuçlar doğurmayabilir.