Page 48 - TURKRptJun19

the emerging world. While the current account position has improved, external debts of $177bn (equal to around 24% of GDP) still need to be serviced over the next twelve months. This leaves the lira, which is key to any monetary policy moves, vulnerable to bouts of risk aversion. There are a number of flashpoints on the horizon,” Jason Tuvey of Capital Economics said on April 26 in a research note. If global growth continues to disappoint, as Capital expects, risk appetite is likely to wane. “Deposit dollarisation in Turkey’s banking sector is becoming increasingly prevalent. And tensions with the US are mounting again, which could ultimately lead to the imposition of fresh sanctions on Turkey,” Tuvey added.
6.0 Public Sector 6.1 Budget
Turkey’s central government budget deficit jumped to TRY18.3bn in April from TRY2.75bn a year ago, the ministry of treasury and finance announced on May 15. Consequently, the cumulative deficit across the first four months of 2019 grew by 135% y/y to TRY54.4bn. Analysts typically commend Turkey's state budget metrics as one of the country's economic plus-points. But they are losing their sheen amid the nation's economic turmoil. “On a 12-month trailing basis, the budget deficit has reached TRY103.9bn (~2.6% of GDP), while the primary balance also points to a TRY16.9bn deficit. According to the IMF definition, i.e. adjusted for one-off items, the primary deficit jumps to a whopping ~TRY100bn,” Serkan Gonencler of Seker Invest said in a research note entitled “Deterioration in fiscal deficit getting more pronounced”. Seker fears that the budget deficit may even reach levels in excess of 3.0-3.5% of GDP in 2019. Tacirler Invest said it saw an upside risk to its budget deficit to GDP estimate at 2.3%. Ozlem Bayraktar Goksen of the Istanbul-based brokerage made the observation in a research note entitled “Annual budget deficit has reached 2.7% of GDP”.
6.1.1 Budget dynamics - specific issues
Pushing the envelope. The Turkish government keeps pushing the envelope in resorting to policies the markets would really rather not have in prospect. Global news services in May released a series of reports on public lenders indulging in manipulative dollar sales to defend the lira, while on May 13 Reuters reported that Turkey's Treasury and Finance Ministry was contemplating whether to tap the central bank's legal reserve funds to borrow around TRY40bn, citing three unnamed officials. The government
48 TURKEY Country Report June 2019 www.intellinews.com