Extending budget deficit in Turkey in March after earthquakes earthquakes

As a result of the deadly earthquake in the province of Hatay on March7th,2023, in the photo after the earthquake at the Antakya Kucuk Sanyi Sitesi industrial park, destroyed buildings can be seen.

According to the Ministry of Finance, the budget of the central government of Turkey showed a deficit of47.22 billion lira ($2.46 billion) in March, while the cumulative deficit for the year2023 amounted to250 billion lira, mainly due to devastating earthquakes.

According to the data, the primary balance, excluding interest payments, recorded a deficit of 2.15 billion lira for March, bringing the total for the first three months to 149.37 billion lira. The budget deficit significantly increased after the earthquakes in southern Turkey in February, when President Tayyip Erdoğan was already facing serious economic challenges.

In February, the central government's budget deficit amounted to 170.56 billion lira, while the cumulative figure for the first two months of the year reached 202.8 billion lira. The rise in inflation, which stood at 50.5% in March, has eroded the savings of the population and also affected Erdogan's popularity, while the earthquakes have complicated his challenges for re-election in the historic elections scheduled for May 14.

The government has taken significant measures to minimize the impact of earthquakes on the economy, such as deferring debt payments and providing salaries and assistance to those affected by the earthquakes, which has also increased the budget deficit. Economists believe that government spending on recovery and aid could raise the budget deficit-to-GDP ratio by more than 5% this year, compared to the government's forecast of 3.5% in September of last year.

In March, the Treasury transferred 3 billion lira for the transformation of regions at risk of natural disasters, after earthquakes devastated parts of 11 provinces in southern Turkey. The previous month, a transfer of 5.6 billion lira was made to these regions.

The budget data shows that in March, about 15.7 billion lira was allocated to families and businesses, compared to more than 25 billion in February.

The economic cost of the earthquakes that resulted in the deaths of more than 50,000 people in Turkey is estimated at around $104 billion, and it is expected to reduce economic growth this year by one or two percentage points.

According to the data, no payments were made in March to the state pipeline operator BOTAS and the government program that protects deposits in lira from currency depreciation. In the first two months of the year, a total of 32 billion lira was transferred to BOTAS. ($1 = 19.2300 lira)