Turkey’s central government budget deficit rose 74% y/y to TRY13.7bn (€3.38bn) in June from TRY7.92bn a year ago, data from the finance ministry showed on July 17. Consequently, the deficit in the first half amounted to TRY25.2bn against the surplus of TRY1.15bn posted for the same period of 2016.

The Turkish government’s budget was stretched by a set of economic stimulus measures brought in during the build-up to the April 16 referendum that officially narrowly voted to bring in an executive presidency. A surplus was recorded in January, but this was followed by three straight months of deficits during the run-up to the referendum. The May budget saw a temporary surplus growth of 76% y/y.

The primary deficit also jumped by 118% y/y to TRY12.5bn in June while the cumulative primary surplus declined by 94% y/y to TRY1.75bn in the first six months of 2017.

Turkey's budget deficit will exceed the official target of TRY46.9bn or 1.9% of GDP in 2017, Finance Minister Naci Agbal said on July 17, commenting on the budget figures, according to Reuters. Privatisation revenues in H1 totalled TRY5.8bn and they will reach a targeted level of TRY13bn by the end of 2017, according to Agbal.

The fiscal policy easing was temporary and a rapid improvement in the budget balances was to be expected in the second half of the year, Deputy PM Mehmet Simsek said in April.

Recently announced government measures aimed at stimulating economic growth are expected to reduce the government’s tax revenues this year. The government transferred its stakes in a number of listed and unlisted companies in March to the country’s newly formed sovereign wealth fund. The switching of the assets will result in a TRY1bn loss in budget revenue.

Tax cuts on white goods and furniture are set to cost the state budget some TRY800mn, Finance Minister Naci Agbal said on April 10.

Earlier this month, the Turkish government has struck an agreement with unions for public sector workers to hike around 200,000 wage packets by 7.5% in the first half of 2017 and 5% in the second half.

Turkey’s budget deficit widened 25% to TRY29.3bn last year.