From bad to worse: Turkey's economy is faltering
Entering 2012, few Turks could have imagined the country's budget balances could deteriorate as badly in just nine months as the latest figures reveal.
The truth hurts now as the country -- among the fastest growing in 2011 -- has plunged into weak growth and high spending.
Finance Minister Mehmet Şimşek met with reporters on Tuesday to announce the budget results for the first nine months of the year. The minister tried his best to keep a smile on his face while releasing the results that put the January-September budget deficit in Turkey at TL 14.4 billion ($7.9 billion). This is a serious number, and the government acknowledges it has missed the budget targets. In the same period of last year, the state coffers enjoyed a TL 234 million ($129 billion) surplus.
Turkey's primary surplus in the first nine months of 2012 was $14 billion. “We anticipate the overall budget deficit for 2012 year-end to touch $18.4 billion, a bleak outlook. … These results definitely indicate deterioration in the budget from last year,” he added.
Şimşek said the government expects budget revenue this year of $200 billion. Separate tax hikes spread over the year have played a prominent role in boosting revenue. Also making mention of economic growth, Şimşek said he expected the Turkish gross national product (GNP) to sit at TL 800 billion and the growth rate at 4 percent. Şimşek estimated exports to equal $158 billion in 2012, and that the budget deficit will widen slightly to TL 33.8 billion ($18.7 billion) next year, with revenues at TL 370 billion and expenditure at TL 403.9 billion, Şimşek said.
The ratio of the deficit to gross domestic product (GDP) is predicted to be 2.2 percent next year, down marginally from the 2.3 percent forecast for this year. The deficit this year is forecast to be TL 33.5 billion. As a cause of the high deficit, Şimşek cited some “unforeseen expenditures” from state coffers.
Regarding Syrian refugees in Turkey, escaping heavy fighting between the Syrian army and opposition forces, Şimşek said that, to date, Turkey has allocated $220.7 million for the refugee camps. “However, this figure is much higher if you consider the spending of local authorities and separate NGOs,” he added. In a statement released on Monday, the Prime Ministry's Disaster and Emergency Management Directorate (AFAD) announced that there waere now 100,363 Syrians in 13 camps built in seven Turkish provinces along the border with Syria.
Şimşek's comments on the budget come at a time when the government is lowering its 2012 growth forecast to 3.2 percent from an earlier 4 percent amid weakening domestic demand, along with ongoing troubles in major trade partners. The global slowdown has made inroads at home, as Turkey has to embrace a modest growth after two consecutive years of robust performance. “But this [3.2 percent] is still a reasonable figure when considering the ongoing troubles in Europe and elsewhere,” Şimşek said in defense of the revised figure.
As regards current account deficit (CAD), a more serious headache for the Turkish economy, Şimşek said Turkey managed to reduce its CAD to $59 billion in October from $79 billion in the same month one year prior. He asserted that increasing energy prices in global markets remained a disadvantage for countries like Turkey that are net importers of oil and gas. Soaring oil prices around the world increase Turkey's energy bill, making the CAD a chronic problem for the country.