...Improved Policy Consistency Key for Creditworthiness: An expected post-election tightening of the fiscal stance in Turkiye would strengthen the effectiveness of monetary policy, in the context of weakened transmission channels. If sustained, this improvement in policy consistency should support lower inflation, a narrower current account deficit and a recovery in international reserves, which could be positive for Turkiye's sovereign rating. Widening Deficits Before Local Elections: Government spending accelerated in the run-up to the March 2024 local elections, widening the budget deficit. On a rolling four-quarter basis, Fitch Ratings estimates that the central government deficit reached 5.2% of GDP in 1Q24. The primary deficit was 2.6% (3.7% programme definition) on a rolling-four quarter basis. Faster Spending: Central government (CG) expenditure in 1Q24 grew by 106% yoy with primary spending increasing by 101% yoy. Earthquake-related spending was an important driver, but compensation...
