Cohabitation, contagion, contraction
In the final week before elections, Erdogan’s lead in the presidential race looks insurmountable, but not large enough to seal the deal in the first round. While we discus some downside scenarios for Erdogan, we are confident in our forecast of a second-round victory over the CHP candidate Muharrem Ince.
Regarding general elections, poll averages put the opposition alliance (Millet) and the HDP one percentage point ahead of AKP-MHP, with HDP at 10.6% -- and still climbing. We scrutinize the horizon with our eagle-like eyes to detect any strange incidents that could suddenly change voter preferences, yet finding none, barring Black Swans.
Finally, after a long silence, our political analyst issues his subjective predictions, so that you can burn him at the stake on the morning of June 25th.
The current account deficit widened further in 12-month rolling terms to just over $57 billion, but slightly smoothed monthly data continued to paint a different picture according to which, both overall and core deficits have improved.
Industrial production expanded at a solid pace in April, but the momentum loss is quite apparent now, which should intensify in May and beyond.
The CBRT’s June expectation survey shows a stagflationary picture, while survey participants seem relatively optimistic regarding the rate and the lira outlooks, say, on a 12-month horizon.
Cosmo detects contagion among EM assets, which would render a recovery in TL-denominated assets even more daunting. The bigger problem might be investors selling an Erdogan and AKP-MHP victory, which is only half true for now. His Cosmic-ness finds value in equities and the short-end of the yield curve, but envisages no triggers that could lure back investors.
Now read on...
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