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Weekly Tracker: September 14-20
TURKEY · Report · 14 Sep 2014

Executive Summary The politics section starts with sketching the “Big Picture”, which predicts that Turkey will be stuck between two major conflicts and forced to choose sides at the expense of its diplomatic flexibility and economic expansion. We argue that unless Turkey fully cooperates, there ...

Cost of Rebalancing Becomes Apparent
TURKEY · Report · 10 Sep 2014

Turkish economy expanded by a weaker than expected 2.1% in Q2 (y/y), and shrank by 0.5% over Q1 (Table 1; Graphs 1-2). Details of the data point to broad-based domestic demand weakness, somewhat deeper than we expected, with foreign demand (net exports) saving the day, and contributing 2.9 pps to...

Davutoglu’s Challenges
TURKEY · Report · 07 Sep 2014

Executive SummaryA host of severe policy challenges lie in-wait for Premier Davutoglu. Yet, all of the potential threats to his reign have long gestation periods, meaning that political risk premiums are very likely to range low in the near term. Ankara is afraid of sustaining collateral damage f...

Food Is Not the Only Problem
TURKEY · Report · 03 Sep 2014

August CPI inflation came in at 0.1%, slightly above expectations, raising the 12-month rate to 9.5% from 9.3% in July (Table 1; Graph 1). A further increase in food inflation to 14.4% from 12.6% earlier, given last year’s low base, is partly to blame, but it is notable that neither the core infl...

​Davutoglu Cabinet and the government program: Few new names, fewer new policies
TURKEY · In Brief · 31 Aug 2014

PM-designate Prof Davutoglu broke a speed record by using only 16 hours to form the 62nd government of Turkey. Adding to speed records, the program of the new government will be read today and it will be smoothly confirmed within 3 days. There are only four new names in the 62nd government, which...

Had to Cut Something, I Guess…
TURKEY · Report · 28 Aug 2014

Needless to say, yesterday’s CBT/MPC decision that lowered the O/N lending rate -- from 12% to 11.25% or to 10.75% for primary dealers -- while leaving the reference one-week repo rate intact (see graph), came as a surprise. Our political analyst-cum-cosmic strategist already shared his thoughts ...

CBT MPC: The cat and mouse game
TURKEY · In Brief · 27 Aug 2014

CBT surprised all commentators once again, as its MPC decided to keep the reference weekly repo rate steady, but trimmed the ceiling of the notorious “corridor” (O/N lending rate) by 75 basis points. We had anticipated a 25-50 basis point cut prior to the meeting, yet do take the decision as vind...

MPC Preview: Thorny Dilemmas…
TURKEY · Report · 26 Aug 2014

What will the CBRT/Monetary Policy Committee do tomorrow at its regular monthly meeting? If we are to go with the economics, the answer is relatively straightforward: stop the cuts now. The economic rationale for rate cuts has always been weak, and it is getting weaker by the day. True, growth se...

Prof Davutoglu to succeed Erdogan
TURKEY · In Brief · 21 Aug 2014

As I predicted, AKP’s top decision-making body convened to select current Foreign Affairs Minister (FAM) Prod Davutoglu as the candidate to replace outgoing Erdogan. Given Erdogan’s conflicting objectives and the limits enforced by the three-term rule, he is probably the best. Nevertheless, he is...

Crunch time in Turkish politics
TURKEY · In Brief · 17 Aug 2014

While Erdogan easily rode to the presidency on the back of a 51.8% majority, the task of transition and succession in the party is turning out to be more arduous. In this Brief, I’m updating my predictions for the new AKP chairman and key cabinet posts, while the Cosmic Dude barges in with his il...

​Erdogan Years, Day One: Weak mandate for strong presidency
TURKEY · In Brief · 10 Aug 2014

Good morning and Welcome to “Erdogan Years” in Turkey. I’m posting my initial thoughts at 6:00 am Turkey time so that our Asian and West European readers have some analysis to work with. The agenda of the coming days will be set by today’s central committee meetings, after which I will pen a more...

Hail To The President
TURKEY · Report · 06 Aug 2014

Executive SummaryErdogan is almost certain the win the presidential election in the first round on Sunday. We start by providing an overview of the policies to be pursued in the Erdogan Era. We are not optimistic that AKP will revert to a more pragmatic policy path in social matters or the econom...

This is in reply to a question by one of our readers
TURKEY · In Brief · 06 Aug 2014

I thought the question is the minds of many and my answer may shed light on two important issues: Q: what is the likelihood of an early parliamentary election? should we expect that if Erdogan does well in the presidential and he does not announce an early parliamentary, we will see lower pressur...

Houston, We Have a Problem
TURKEY · Report · 04 Aug 2014

Consumer price inflation in July surprised on the upside coming in at 0.45%, versus consensus expectation of a modest drop of 0.1%.This has pushed the 12-month rate slightly higher to 9.3%, from 9.2% in June. Producer price inflation eased somewhat to 9.5%, probably largely owing to a more stable...

Brief Political Update on Id Developments
TURKEY · Report · 01 Aug 2014

I intended to hold my fire until our Monthly Report is completed by around the middle of next week, but the sudden flare-up of panic in GEM compelled me to comment on the recent political developments. Our very own Cosmic Strategist asserts that when risk appetite is down, investors begin to scru...

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