Turkey’s budget deficit jumped 70% last year as the government boosted spending before local elections in the face of a recession, while aggressive monetary stimulus gave the housing market a big boost heading into the new year.
The deficit was 123.7 billion liras ($21 billion) in 2019, just below a government forecast. One-off contributions, including tapping central bank legal reserves, offset the spending and could make future forecasts hard to meet, analysts said. Once 2019’s economic output is calculated, the deficit is likely to come around the government’s estimate of 2.9% of GDP.
In December alone, the deficit was 30.8 billion liras ($5.2 billion), while the primary budget balance, which excludes interest payments, showed a deficit of 26.59 billion liras, the Treasury and Finance Ministry said.
Ankara said in September that it expected to limit deficits in 2020 and 2021 to 2.9% of GDP, while it expects GDP growth to jump to an ambitious 5%. The economy emerged from recession in 2019 after a currency crisis in 2018.
Haluk Burumcekci, of Burumcekci Consulting, said 2019 revenues had been boosted by central bank profits, transfers from legal reserves, one-off contributions and tax restructurings.
For 2020, he said, “the target of 2.9% does not look realistic without additional measures”.
House sales jumped 48% year-on-year in December to 202,074, the second consecutive monthly leap.
The central bank has slashed interest rates by 12 percentage points since July to boost the recovery.
Sales with mortgages were up 603.4% in December, the Turkish Statistical Institute said, accounting for around a quarter of total sales.
Data from Turkish state banks show that mortgage rates dropped to as low as 0.79% in January, nearly half the rate a year earlier.
“Apart from the lower mortgage rates, a sharp decline in deposit rates also supported home sales, with people preferring to invest in housing instead of leaving money in banks,” said Makbule Yonel Maya, general manager of TSKB Real Estate Appraisal, according to Reuters.
Deposit rates fell to about 10% in December from 20% at the beginning of last year.
The central bank announces its latest interest rate decision on Thursday at 1100 GMT. In a Reuters poll on Monday, the median estimate was for a rate cut of 50 basis points, with eight out of 21 economists expecting it would keep the rate steady.
In 2019 as a whole, house sales declined 1.9% to 1.35 million, with sharp rises in the latter part of the year compensating for a slump in the first half.
House sales to foreigners climbed 14.7% in 2019 to more than 45,000 houses, the institute said. Iraqi citizens were the biggest buyers of Turkish properties last year, followed by Iranians and Russians.
