Turkey’s December deficit widened from a year earlier to 17.9 billion liras ($9.7 billion), as extra spending on roads, schools, health care and earthquake relief drove the full-year budget into a shortfall.
The deficit widened from 16.1 billion liras in December 2010 as authorities opted to forgo a narrower gap for the full year in favor on infrastructure spending, Finance Minister Mehmet Simsek said at a news conference in Ankara today. For the year, the deficit was 17.4 billion liras, or about 1.4 percent of gross domestic product, narrowing from 3.6 percent in 2010 and the smallest gap since the 0.6 percent in 2006. The goal was a total deficit of 22.2 billion liras.
The government spent additional revenue as annual GDP growth of 8.2 percent in the third quarter and record-low unemployment helped increase tax income and cut spending on the social-security system. Revenue was also bolstered by an offer to waive some penalties on overdue debts to the state. Prime Minister Recep Tayyip Erdogan won re-election to a third term in nationwide voting in June.
“We could have had an even smaller deficit, but we spent a total of 11.1 billion liras on infrastructure and the earthquake” in Van in October, Simsek said. “Fiscal discipline remains the cornerstone of Turkey’s macro-economic success, and we’ll work to maintain it in 2012.”
Room to Maneuver
Debt to GDP probably declined to below 40 percent in 2011, Simsek said. That’s a “reasonable” level and gives authorities “room to maneuver” in case of any economic shocks this year, he said.
The 2012 budget aims for a deficit of 21.1 billion liras or 1.5 percent of GDP, assuming the economy grows 4 percent, according to the govenrment’s medium-term plan. The growth estimate could be revised down if the sovereign-debt problems in Europe, Turkey’s main export market, worsen, Deputy Prime Minister Ali Babacan said on Jan. 5.
If “the economy faces a high risk of a recession, we would not rule out some fiscal expansion,” Tevfik Aksoy, chief economist for the region at Morgan Stanley & Co. in London, said in an e-mailed report today. “The budget deficit might actually rise in 2012 and reach 2.2 percent of GDP,” which would still mean “favorable debt dynamics.”