The central government budget produced a deficit of TRY 5.1bn (EUR 1.7bn) in March, the ministry of finance said on Tuesday. The deficit was TRY 5.4bn in the same month of 2013 while the budget ran a surplus of TRY 1.7bn in February 2014.

The primary surplus stood at TRY 538mn in March versus a primary deficit of TRY 460mn a year ago. Budget expenditures rose 22.9% y/y with interest expenditures rising by 14.2% y/y. Revenues grew 29.1% y/y, data of the ministry showed. Tax revenues rose 7.2% y/y in March. VAT collection increased by a limited 3.8%, special consumption tax revenues fell 4.1% y/y and import tax revenues declined 3.8% y/y, confirming the expectations that domestic demand remains weak.

In Q1, the central government budget showed a deficit of TRY 1.5bn, representing a 69.1% y/y increase. Expenditures and revenues rose 11.3% y/y and 10.8% y/y, respectively, in the first three months of the year. The budget primary surplus fell 12.6% y/y to TRY 12.46bn in Q1.

The government targets a budget deficit of TRY 33.3bn (1.9% of GDP) and a primary surplus of TRY 18.7bn (1.1% of GDP) this year.

The government will maintain strong fiscal discipline in the remainder of the year, finance minister Mehmet Simsek said. There are downside risks to growth but there will be a moderate GDP expansion this year, the minister also asserted. Turkey’s current account deficit will narrow significantly this year thanks to moderate domestic demand, and it is likely to be below USD 55bn, Simsek said.