Download 6. P F ublic inance

Central Bank of the Republic of Turkey
6. Public Finance
As of the first half of 2014, the budget performance displayed a slight year-on-year deterioration,
mostly due to the upsurge in primary expenditures and the slowdown in domestic demand driven tax
revenues that became more significant in the second quarter. The favorable course of tax revenues in
the first quarter is believed to be the result of early-2014 tax hikes, exchange rate and price movements
and advance spending on consumption goods before the adoption of macroprudential measures to
restrict domestic demand. On the other hand, the rate of increase in tax revenues slowed slightly in the
second quarter. Meanwhile, the favorable performance of non-tax revenues is mainly attributed to
temporary revenue items that are considered as one-offs.
With regard to the sustainability of the positive course of fiscal balances and to maintaining
fiscal discipline on a permanent basis, it is critical that the fiscal policy be implemented in line with the
MTP’s framework and the primary expenditures be kept under control for the rest of the year.
6.1. Budget Developments
The central government budget posted a deficit of 3.4 billion TL, while the primary budget
registered a surplus of 23.1 billion TL in the first half of 2014 (Table 6.1.1). Tax revenues were on track with
the year-end target, while primary expenditures continued to rise dramatically.
Table 6.1.1.
Central Government Budget Aggregates
(Billion TL)
Central Government Budget
Expenditures
January-June
2013
January-June
2014
Rate of
Increase
(Percent)
Actual/Target
(Percent)
Targeted
Annual Rate
of Increase
(Percent)
187.9
213.9
13.8
49.0
7.0
Interest Expenditures
23.3
26.5
13.6
50.9
4.0
Primary Expenditures
164.6
187.4
13.9
48.7
7.4
Central Government Budget
Revenues
190.9
210.5
10.2
52.2
3.5
I. Tax Revenues
158.4
168.1
6.1
48.3
6.8
II. Non-Tax Revenues
26.2
34.1
30.3
76.5
-10.8
Budget Balance
3.1
-3.4
-
10.1
-
Primary Balance
26.4
23.1
-12.4
123.2
-
Source: Ministry of Finance.
The central government budget deficit to GDP ratio, which declined to 1.2 percent in 2013 amid
the favorable budget performance, is estimated to increase slightly to 1.5 percent in the first half of
2014 (Chart 6.1.1). Meanwhile, the primary budget surplus to GDP ratio assumed an upward course
after declining to 1.1 percent in the third quarter of 2012. This ratio, which hit 2 percent at end-2013, is
estimated to decline slightly to 1.7 percent in the first half of 2014.
Inflation Report 2014-III
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Central Bank of the Republic of Turkey
Chart 6.1.1.
Chart 6.1.2.
Central Government Budget Balance
Central Government Budget Revenues and
Primary Expenditures
(Annualized, Percent of GDP)
(Annualized, Percent of GDP)
Budget Balance
Primary Balance
Budget Revenues
Primary Expenditures
7
7
26
26
5
5
24
24
3
3
22
22
1
1
20
20
-1
-1
-3
-3
18
18
-5
-5
16
16
-7
14
-7
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2*
2008
2009
2010
2011
2012
2013 2014
14
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2*
2008
2009
2010
2011
2012
2013 2014
* Estimate.
Source: Ministry of Finance.
Having surged significantly since 2012 and reaching 22.9 percent at end-2013, the central
government primary expenditures to GDP ratio is estimated to remain elevated also in the first half of
2014 (Chart 6.1.2). On the other hand, the central government budget revenues to GDP ratio
increased upon robust economic activity as well as tax adjustments in September 2012 and January
2013, reaching 24.9 percent at end-2013. The ratio is estimated to decline to 24.6 percent in the first half
of 2014, mainly due to slowing tax revenues based on domestic demand.
The central government primary budget expenditures, which started to surge as of the second
half of 2012, increased further in the first half of 2014. Accordingly, the central government primary
budget expenditures registered a year-on-year increase of 13.9 percent in this period (Table 6.1.2).
During January-June 2014, current transfers, personnel expenditures and purchase of goods and
services, which are major items in primary expenditures, registered an increase of 10.1, 16.5 and 14
percent, respectively. The relatively smaller increase in current transfers restricted the rise in primary
budget expenditures to some degree. Personnel expenditures and public investment expenditures
(capital expenditures and transfers) were the main drivers of the rapid increase in primary expenditures.
On the other hand, most of the upsurge in lending resulted from the rise in loans extended to SEEs.
Table 6.1.2.
Central Government Primary Expenditures (Billion TL)
Primary Expenditures
1. Personnel Expenditures
2. Government Premiums to SSI
3. Purchase of Goods and Services
4. Current Transfers
a) Duty Losses
b) Health, Pension and Social Benefits
c) Agricultural Support
d) Shares Reserved from Revenues
5. Capital Expenditures
6. Capital Transfers
7. Lending
January-June
2013
164.6
49.0
8.1
13.3
75.3
1.4
36.5
6.8
19.6
12.0
2.2
4.7
January-June
2014
187.4
57.0
9.6
15.2
83.0
1.5
39.9
6.8
22.8
13.9
2.7
6.0
Rate of
Increase
(Percent)
13.9
16.5
18.7
14.0
10.1
6.5
9.2
0.9
16.7
16.2
22.7
27.6
Actual/Target
(Percent)
48.7
51.9
50.8
40.5
50.7
35.4
51.8
70.5
48.4
37.9
41.5
78.3
Source: Ministry of Finance.
80
Inflation Report 2014-III
Central Bank of the Republic of Turkey
In the first half of 2014, the central government general budget revenues recorded a year-onyear increase of 9.6 percent (Table 6.1.3). In this period, tax revenues and non-tax revenues increased
by 6.1 and 30.3 percent, respectively.
Table 6.1.3.
Central Government General Budget Revenues
(Billion TL)
General Budget Revenues
I-Tax Revenues
Income Tax
Corporate Tax
Domestic VAT
SCT
VAT on Imports
II-Non-Tax Revenues
Enterprises and Property Revenues
Interests, Shares and Fines
Capital Revenues
January-June
2013
January-June
2014
Rate of Increase
(Percent)
Actual/Target
(Percent)
184.5
158.4
29.5
15.4
19.0
40.0
30.9
26.2
7.5
12.2
5.4
202.2
168.1
34.9
15.4
19.7
40.7
31.5
34.1
8.8
17.0
6.4
9.6
6.1
18.1
0.0
3.7
1.8
1.8
30.3
17.7
39.9
18.3
51.5
48.3
49.3
49.5
49.8
45.5
48.5
76.5
107.8
65.5
72.8
Source: Ministry of Finance.
A closer analysis of tax revenues reveals that income tax revenues displayed high-rated rises in
the first half of 2014, and the rate of increase in tax revenues declined to 3.4 percent from 6.1 percent
after excluding income tax. This is largely attributed to the slowdown in consumption-based tax
collection. Among consumption-based tax revenues, domestic VAT revenues increased by 3.7
percent, while the rate of increase in SCT and import VAT revenues was merely 1.8 percent. The details
of SCT revenues show a 13.3 and 8.4 percent increase in tax revenues on tobacco products and motor
vehicles, respectively. On the other hand, tax revenues on petroleum and natural gas products, which
account for a large share of SCT revenues, decreased by 5.2 percent.
Having turned positive amid tax hikes in September 2012 as well as the base effect, the annual
rate of increase in real tax revenues started to slacken in the second half of 2013. Real tax revenues
dropped by 6.3 percent in the first half of 2014 due to the marked slowdown in domestic demand
driven tax revenues (Chart 6.1.3). Among consumption-based tax revenues, domestic VAT, SCT and
import VAT revenues decreased by 15.2, 8 and 11.8 percent in real terms, respectively, in the first half of
2014 (Chart 6.1.4).
Chart 6.1.3.
Chart 6.1.4.
Real Tax Revenues
Real VAT and SCT Revenues
(Annual Percent Change)
(Annual Percent Change)
Real Domestic VAT Revenues
Real SCT Revenues
60
Real VAT Revenues on Imports
50
25
25
20
20
60
50
40
40
30
30
15
15
10
10
20
20
5
5
10
10
0
0
0
0
-10
-10
-20
-20
-30
-5
-5
-10
-10
-30
-15
-15
-40
12341234123412341234123412
2008
2009
2010
2011
2012
2013 2014
-40
12341234123412341234123412
2008
2009
2010
2011
2012
2013 2014
Source: Ministry of Finance.
Inflation Report 2014-III
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Central Bank of the Republic of Turkey
6.2. Developments in the Public Debt Stock
Public debt stock indicators displayed a favorable outlook in the first half of 2014. The total
public net debt stock and the EU-defined nominal debt stock to GDP ratios continued to decline, the
share of fixed-rate securities in the total debt stock increased, the average maturity of the debt stock
extended and the real cost of borrowing remained low over the past three months.
The central government debt stock stood at 593.4 billion TL as of end-June 2014 (Chart 6.2.1). In
the first quarter of 2014, the total public net debt stock and the EU-defined nominal debt stock to GDP
ratios decreased by 0.8 and 0.4 points, respectively, compared to end-2013 figures (Chart 6.2.1).
Chart 6.2.1.
Chart 6.2.2.
Public Debt Stock Indicators
Composition of the Central Government Debt
Stock*(Percent)
593.4
600
60
Floating-Rate
FX-Denominated/FX-Indexed
100
100
80
31.2
80
Fixed-Rate
31.2
Total Public Net Debt Stock
(Percent of GDP)
EU-Defined Central Government Nominal Debt Stock
(Percent of GDP)
Central Government Total Debt Stock
700
(Billion TL, right axis)
80
300
0
0
2005
2007
2009
2011
2013
40
36.2
100
2003
40
60
200
11.9
20
60
31.6
400
20
37.3
40
32.6
35.9
500
0
2014/6
20
0
2001
2003
2005
2007
2009
2011
2013
* FX-Denominated/FX-Indexed debt stock includes external debt stock and FX-denominated and FX-indexed domestic debt stock.
Source: Treasury.
The share of fixed-rate securities in the total debt stock increased slightly from end-2013
(Chart 6.2.2). As for the interest and exchange rate structure of domestic borrowing, the share of fixedrate borrowing registered a year-on-year decline in the first five months of 2014. The ratio of public
deposits to average monthly debt service stands at 170.3 percent. The average term-to-maturity of the
domestic debt stock rose to 53.9 months (Chart 6.2.3). Meanwhile, in the first six months of 2014,
external borrowing by bond issues amounted to 5.4 billion USD, with the average maturity standing at
15.7 years (Chart 6.2.4).
Chart 6.2.3.
Chart 6.2.4.
Average Maturity of the Domestic Cash Borrowing
and Term-to-Maturity of the Domestic Debt Stock
Borrowing By Bond Issue*
(Month)
External Borrowing (billion USD, right axis)
Average Maturity of External Borrowing (year)
Maximum Maturity of External Borrowing (year)
Average Maturity of Domestic Debt Stock
Average Maturity of Domestic Cash Borrowing
75
75
69.1
53.9
60
35
60
6
25
45
45
20
30
30
15
8
7
30
5
4
3
10
2
15
2013
2014/6
2012
2011
2010
2009
2008
2007
2006
2005
2004
0
2003
1
0
2002
2014/6
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
0
2000
0
5
2001
15
* Total amount of external borrowing during the corresponding year.
Source: Treasury.
82
Inflation Report 2014-III
Central Bank of the Republic of Turkey
The domestic debt rollover ratio stood at 86.5 percent at end-May 2014 (Chart 6.2.5). Having
plummeted from early 2009 to early 2011, the average real interest rate1 that had recently been on the
rise due to global financial fluctuations and the cautious monetary policy stance recorded low levels in
the past three months (Chart 6.2.6).
Chart 6.2.5.
Chart 6.2.6.
Total Domestic Debt Rollover Ratio
Average Maturity and Interest Rates of Borrowing at
Discount Auctions
(Percent)
Maturity (day)
Average Compounded Interest Rate (right axis)
110
110
100
100
90
90
86.5
84.5
Real Interest Rate (right axis)
30
600
25
500
20
400
15
300
10
200
5
100
0
80
70
70
2003
2005
2007
2009
2011
2013
0
-5
1203
0604
1204
0605
1205
0606
1206
0607
1207
0608
1208
0609
1209
0610
1210
0611
1211
0612
1212
0613
1213
0614
80
700
Source: Treasury, CBRT.
Real interest rates are calculated by subtracting the 12-month-ahead CPI expectation of the CBRT Survey of Expectations from nominal interest
rates (average annual compounded interest rate at the Treasury’s TL-denominated zero-coupon securities auction).
1
Inflation Report 2014-III
83
Central Bank of the Republic of Turkey
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Inflation Report 2014-III