All relatively calm on the Turkish front
It was a relatively quiet week in Turkey, for a change. After the Erdogan-Putin summit on the 8th of January, twin ceasefires were declared in Syria’s Idlib Province and by the warring parties in Libya. Yet, there is no guarantee that the fragile calm will last in either place.
December-January polls reveal undecideds reaching 15%, who may actually be voters mulling whether to give Ahmet Davutoglu or Ali Babacan a try instead of AK Party, but this is merely our speculation. What is fact is that President Erdogan is losing some of his magic, even though he remains the most popular politician in Turkey. The Libyan adventure and Canal Istanbul appear to get poor marks from the constituency. Two polls suggest Turks have largely lost hope about the future. Will they also lose faith in Erdogan?
Unemployment fell relatively more noticeably in October, on the back of solid job growth, which seems to be a lagged reaction to stimulus-driven rebound in growth, and hence, is very likely unsustainable. December cash budget has shown little sign of improvement in the budget trends, but the revised full year deficit target for 2019 has likely been broadly met.
Motivated by some market chatter, we take a quick look at the CBRT balance sheet, which shows a substantial drop in net reserves, and suggests that CBRT profits might have been inflated by the revaluation account, after all.
The key attraction of the week is the MPC meeting on Thursday. It is possible that the MPC may pause, as the consensus seems to have it, but another rate cut, albeit a somewhat more modest one, is still more likely, in our view.
There will be a few important data releases this week (November industrial production, November BOP, and December budget). We forecast a modest current account deficit in November, around $0.2 billion, which, if true, should reduce the 12-month rolling surplus to around $3.1 billion from around $4.3 billion in October.
Cosmo being strange as He is, asks a bizarre question: Do Turkish financial markets exist, or are they artificial constructs with no real-life application and relevance?
Now read on...
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