Anchorless in Ankara
In this econ-only Weekly, we briefly discuss the key data releases and developments of the past week.
Almost all confidence indices – consumer and sectoral – as well as manufacturing sector capacity utilization, improved in June, which likely owes to the easing of lockdowns, rather than portending a secular pick-up in growth.
Minister of Treasury and Finance Lutfi Elvan said Turkey will likely grow 20%, y/y, in Q2, and disinflation should be the priority. We say “so what” to the former, and “just do it” to the latter.
The USD/TL weakened further last week, as the CBRT desperately sought solutions to curtail currency weakness and reverse dollarization without hiking the policy rate. As we wrote during the week, the CBRT is reportedly working on some measures to discourage dollarization by tweaking its reserve requirement policy. It is very unfortunate and frustrating to see the CBRT (or the Palace, rather) continue to attack the symptom rather than the cause, and have us write about it over and over again.
Based on a new report by the state meteorology body, Turkey is suffering from severe drought across the country, which, aside from considerable hardship, should cause further problems in terms of inflation. Meanwhile, Turkey received almost one million tourists in May, but this is only about 25% of seasonal averages in the past.
On politics, just like the Biden-Erdogan meeting, the EU-Turkey session produced no tangible news that could act as a positive catalyst for markets, while Mr. Erdogan, probably in a desperate attempt to galvanize his base, seems determined to go ahead with the Istanbul Canal Project.
We finish our note with the usual charts on CBRT reserves, as well as resident and nonresident deposit and portfolio flows, respectively.
We had to largely skip politics this week, because our politics author is having some mild health issues. We very much apologize for the inconvenience, but he/we will be back with our political analyses and scenarios very soon.
Let us take this opportunity to let you know our report schedule as well. We plan to release our (bi-weekly) Covid Watch tomorrow, as well as a few topical pieces later in the week/early next, while our Quarterly, God Willing, will be issued on July 9, a bit later than usual.
Now read on...
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