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COUNTRY INSIGHTS

The great divergence
TURKEY · Report · 04 Nov 2018 · 1 response

Politics and the economy are moving in opposite directions, with the former improving visibly, as economic challenges seem to deepen. On the politics front, we expect the US to grant Turkey waivers from sundry Iran sanctions and hush up the Halkbank investigation, as Erdogan and Trump get read...

CBRT: Prepare for volatility in inflation
TURKEY · In Brief · 31 Oct 2018

The CBRT has released this year's final Inflation Report today.2018 yearend inflation forecast was revised sharply up to 23.5% (midpoint of a range between 21.9% and 25.1%) from 13.4% previously, which is close to 24.2% of the latest CBRT expectation survey (October results), but higher than New ...

This time is different
TURKEY · Forecast · 28 Oct 2018 · 1 response

After an exceptionally volatile August, markets have stabilized and turned even constructive in recent weeks, relatively speaking, on the back of myriad of interventions by the government, but most importantly thanks to the release of Pastor Brunson from prison. Yet, the damage is done. We fear t...

Policy rate unchanged, as expected
TURKEY · In Brief · 25 Oct 2018

At today’s Monetary Policy Committee meeting, the policy (one-week repo) rate was left unchanged at 24% (simple), as expected (see chart). There were a few outliers in the polls, expecting (or hoping?) that the Bank would hike rates with a view to rebuilding its credibility and/or because real po...

​AKP-MHP suspend alliance, as Erdogan rips apart Saudi account of Khashoggi murder
TURKEY · In Brief · 23 Oct 2018

Let’s put first things first.Tuesday witnessed a monumental development in Turkish politics, as MHP leader Mr. Bahceli broke off the alliance in upcoming March local elections with AKP. While the status of the broader alliance is up in the air, as far as I am concerned, it has ended in practice, ...

Diplomatic gains, domestic troubles
TURKEY · Report · 21 Oct 2018

After a successful Pompeo visit to Ankara, odds for improvement in the Turko-American relations, albeit temporary and transactional, appear much higher. The sides will agree to defer thorny issues to 2019, while Ankara will receive some slack on Iran sanctions and Halkbank in return for a promise...

A window of opportunity opens up
TURKEY · Report · 14 Oct 2018 · 1 response

The decision to send Pastor Brunson home is testimony to President Erdogan’s flexibility, coming only 12 days after he personally accused the cleric of being a terrorist. There is now hope for sincere dialogue in areas of dispute with the US. However, the White House needs to reciprocate by endin...

​Brunson or sanctions?
TURKEY · In Brief · 10 Oct 2018

Until the blood bath in Wall Street infected them, TL denominated assets largely outperformed EM peers despite an anti-inflation program full of hot air, primarily because global investors believe American Pastor Mr. Brunson will be released in his court hearing on Friday. In my last remarks on t...

Choppy waters ahead...
TURKEY · Report · 07 Oct 2018 · 1 response

The recent relative improvement in market sentiment has shown the importance of improving relations with the US, and of orthodox economic policies, as manifested by CBRT’s September rate hike. But further progress is between the lips of President Erdogan, who reveals little sign of conduct change...

September inflation: Ugly numbers
TURKEY · Report · 03 Oct 2018

September CPI-inflation came in at a much higher than expected 6.3%, m/m (consensus: 3.6%), raising the 12-month rate sharply higher to 24.5%, from 17.9% in August, while the increase in producer prices, at 10.9% in the month, was even steeper, with the 12-month rate rising to a whopping 46.2%, f...

Few tangible results from the roadshow
TURKEY · Report · 30 Sep 2018

As one of us is technically on holiday, and the other is inundated with meetings and travels, we keep this Weekly short, promising a more comprehensive Monthly for next Sunday. There was no progress towards a truce between Turkey and the US during President Erdogan’s visit to the UN. Contrary ...

Start spreading the news, off to NYC
TURKEY · Report · 23 Sep 2018

The next milestone in Turkey’s journey between salvation and damnation arrives this week, as President Erdogan travels to NYC to meet with investors and most likely to hear from the American administration about the cost of not complying with its requests. Emboldened with a diplomatic victory in ...

MTEP/NEP: First impressions...
TURKEY · Report · 20 Sep 2018

The much-anticipated Medium-Term Economic Program (MTEP) – or the New Economic Program (NEP) by its new name -- was announced this morning by the Treasury and Finance Minister Mr. Berat Albayrak in a short presentation. (The document is available only in Turkish for the moment; English version of...

In stable, but critical condition
TURKEY · Report · 16 Sep 2018

Turkey breathed a sigh of collective relief, as pressure from Turkey and the international community forced Assad to back off from an assault on Idlib City and the CBRT, contrary to consensus, over-delivered. Yet, this is most likely only a brief respite, before even more daunting contests of wil...

MPC: Back from the brink, again…
TURKEY · In Brief · 13 Sep 2018

The Monetary Policy Committee raised the policy rate (weekly-repo) by a markedly higher than expected 625 bps to 24% at today’s meeting, from 17.75% earlier. As all funding was being provided at the O/N rate of 19.25%, the move corresponds to a 475 bps hike, de facto, assuming all funding will no...

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