Turkish deficit widens as tax revenue slows

• Revenue down 18%
• Decline in income tax
• Expenditure up 27%

The Turkish budget slipped deeper into the red in May, as increasing outlays continued to outstrip revenue, with the flow of tax earnings into the treasury coffers slowing as the economy cooled.

There was a TL298 billion ($6.4 billion) shortfall in the budget last month, according to data issued by the Treasury and Finance Ministry, with revenue falling 18 percent compared to the same month in 2025, at TL1.1 trillion ($23.7 billion).

By contrast, budgetary expenditures for the month were TL1.4 trillion, a 27 percent increase year on year.

The May figures took the five month deficit to TL1.1 trillion, well over half the government’s projected target of TL1.93 trillion for year-end 2026. The gap widened by a 37 percent increase in expenditures and a more modest 33 percent rise in revenues over the period.

State revenue was impacted by falls in income tax returns, along with declines in corporate and value added tax, indicating a slowing of the economy. There was also a drop in cash flows from Turkey’s special consumption tax, a levy imposed on motor vehicles, natural gas, tobacco and alcohol products and automotive fuels.

This revenue stream was partially suspended in March by the government as prices at the petrol pump soared after the outbreak of the conflict in the Gulf, the move easing pressure on motorists but eroding budget earnings.

With the budget deficit increasing over the first five months of 2026, much of it directed to paying interest on borrowing which rose by 50 percent in the year to date, the government’s programme to curb inflation is under threat, economist Mustafa Sönmez told AGBI.

“They talk about so-called disinflation, but we see that spending has increased by 38 percent despite savings being mentioned in the austerity measures,” he said.

While agreeing that interest payments were putting pressure on the budget, financial analyst İris Cibre took some positives from the latest data.

“Although not all spending is productive, I see three items in spending as very positive: outlays on railways, on public housing and support for animal husbandry,” she said.

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There was still the potential for the budget to meet its year-end deficit targets, said Cibre.

Mehmet Şimşek, Turkey’s treasury and finance minister, is of a similar view, saying on June 12 that the budget was on track to meet or exceed its goals for 2026, despite external pressures.

“We will meet the budget deficit targets this year, and there is a high probability that we will perform below the 3.5 percent target as a percentage of national income,” he said while addressing a meeting of banking officials.