ANKARA - TEPAV, has forecasted that the revised budget deficit target of 8.5 billion YTL that was disclosed by the Ministry of Finance in July would not be achieved, but the deficit would be less than the initially forecasted 16.8 billion YTL. In the statement which indicated that this is not sufficient to evaluate the performance of the administration as successful, it is said that "We arrive at the conclusion that … the performance is not that good at all when we look at the picture from the perspective of primary balance which better reflects the government's fiscal position and policy execution skill."
Fiscal Monitoring Report - Budget Results for October 2007 prepared by Economic Policy Research Foundation of Turkey (TEPAV) Economic Stability Institute has been published. In the report, it is reminded that the Ministry of Finance had disclosed its 2007 year end forecast of budget deficit when it presented the 2008 budget to the Turkish Grand National Assembly and the report said "It is forecasted that 2007 year end budget targets will be met and the budget deficit will be lower than forecasted in the beginning." The report then continued "We think that it makes sense to look at the flip side of this picture that depicts a positive trend in budget performance and targets which are met." and said "As a matter of fact, we arrive at the conclusion that 2007 budget realization forecast is not concluded with a performance increase, on the contrary, the performance is not that good at all when we look at the picture from the perspective of primary balance which better reflects the government's fiscal position and policy execution skill.
Considering the negative performance in the budget in 2007, we can reach at the following conclusions:
1. This is the continuation of a process which had started in the second half of 2006,
2. In this process, primary expenditures could not be controlled and this has become even more evident in 2007. Thus, the Administration had difficulties in controlling the expenditures, with the exception of some periods, and they tried to save the year 2006 by deferring payments to next year as their flexibility in this area decreased. It is probable that they will follow the same course of action this year as well.
3. Even more important is the fact that the performance in tax collections is insufficient to meet the expenditures and moreover, policies of the Administration that rely on indirect taxes as a whole are at an end and there are difficulties in tax collection.
4. As a combination of these, the degradation in fiscal performance is not specific to this year, but its roots go back as far as the middle of last year."
In the report, it is expressed that program defined primary surplus performance by the end of the first 10 months of 2007 had been realized at 62.1% of the year end target, whereas realization of primary surplus performances, for the same periods, as percentages of year end targets in the interval 2004-2006 were higher than 90%'s. "Some expenditures may be deferred to next year" According to the report, when budget performances of 2006 and 2007 were considered after corrections are applied, corrected primary expenditures, which was forecasted to be 8.6% for the first quarter of the year, significantly increased to a level of 16.9% and came down to 11.3% for the period January-October. On the revenue side, corrected total budget revenues went down from 10.6% in the first quarter to 10.3% at the end of the second quarter and to 10% in the period January-October. While corrected tax revenues exhibited a low performance and went down from 9.4% for the first quarter to 7.5% at the end of the second quarter, the rate of increase went up to 10.5% in the period January-October. The report included the following expressions on this subject: "As a result: a comparison is made on the basis of January-October after accounting for effects of the expenditures deferred to next year (i.e. 2007), which is a violation of the annual budget principle, and one time measures, we can say that there is a relative slow down compared to previous periods. The fact that developments in expenditures that are observed from the beginning of the year till the end of July has been decreasing as we come closer to the end of the year indicates the possibility of deferring some expenditure liabilities to next year this time as well."
Ministry of Finance was wrong in the revision When the Ministry of Finance was presenting the budget for 2008 to the Turkish Grand National Assembly, it disclosed the year end budget deficit forecast as 14.9 billion YTL. Thus, the Ministry had essentially accepted that it would not be able to achieve the revised target stated in the "2007 Central Government Budget Realizations and Expectations Report" in July. The Ministry had revised the year end budget deficit target as 8.5 billion YTL.