Between a rock and a hard place
The politics section opens with a summary of the US-Iran tensions and the flare up in Idlib to put Turkey’s regional dilemmas in context. The ever-changing features of the Middle East kaleidoscope will likely force President Erdogan to change policy and make sacrifices eventually, but that discussion could wait until after the June 23rd Istanbul elections. For now, he just wants to maintain the status quo.
As for the S-400 crisis, we show proof that Ankara still believes Washington is bluffing. Very high-level negotiations are in progress between the parties to find a way out of this dispute, or at least to delay sanctions until after Istanbul elections. Despite Ankara’s grandstanding, we remain of the opinion that the delivery of S-400s will be delayed.
In Istanbul, the wind is filling the sails of Ekrem Imamoglu who is touring boroughs non-stop making friends across the political spectrum. All available polls show him ahead, or a dead heat. The poor state of the economy and further economic volatility may further help him in the ballot. Short of ballot fraud, Binali Yildirim’s chances of victory are slim. How worried, then, should we be about fraud?
There was not much new on the economy front last week, on which we nevertheless provide a brief rundown inside. The key data releases of the upcoming week are the Q1 National Income Accounts and April trade data, both due on Friday. Broadly in line with the consensus, we forecast a 3% year-on-year contraction in economic activity, but around 0.5-1% expansion in quarter-on-quarter terms, while the trade deficit should come in around $3 billion in April, as we already know based on the preliminary data.
Cosmo says this crash will be different, betting on “death by thousand bites” rather than a sudden balance of payments implosion.
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