The 2023 budget may end up with a surprise Evaluation Note / M. Coşkun Cangöz

The budget data for January-May point to a significant deterioration compared to the same period of the previous year. As a matter of fact, the budget, which posted a surplus of 124.6 billion TRY in the first five months of 2022, has posted a deficit of 263.6 billion TRY in the same period of 2023. Moreover, the spending increases that will arise from the retirement age victims regulation, raising pensions to a minimum of 7,500 TRY, increasing the grants to be paid in Eid al-Fıtr and Eid al-Adha, increasing the 3600 additional payment coefficient for the civil servants, providing free natural gas to residences, and raising the minimum wage, which were realized within the scope of election pledges, have not yet been reflected in the budget figures. Additionally, while the expenditures for aid and shelter for earthquake victims following the February 6 earthquakes have been partially covered in the budget, the fiscal impact of the budgetary transfers to the Disaster and Reconstruction Fund, established after the earthquake, for the construction of destroyed and damaged public buildings and infrastructure has not yet been fully revealed. On the other hand, a one-time earthquake tax was introduced in March on the earnings of corporations, except those in the earthquake zone, for the year 2022.

Mehmet Şimşek, the Minister of Treasury and Finance, who took office after the elections, made a statement to "return to rationality”. Therefore under the conditions of high inflation, high deficit of the balance of payments, and the rapid deterioration in the budget performance compared to the previous year, the government’s fiscal policy response has become critical. In this context, the outlook for the budget and an assessment of what can (cannot) be done in the remainder of the year will provide clues to the answer to this question.

You may read evaluation note from here.