Enter Twilight Zone
Ankara has grasped the consequences of quarreling with all of her diplomatic partners. The new policy of reset or normalization is in full swing, but there are no positive results so far. That Ankara has changed strategy is commendable, but now it has to learn the art of compromise, or give-and-take. It will take time, but we think this time the new path in diplomacy is permanent.
At home, AKP is eclipsing very quickly. The crumbling at the edges that had been going on for a few years by now, has infected the core. We explain the reasons why Erdogan and AKP+MHP are losing the public debate. But we admit we can’t guess how the decline will play out in the endgame. June may prove decisive for Erdogan’s fate.
April manufacturing PMI, the overall index, was barely above 50, while output sub-index fell markedly below it, suggesting that a visible slowdown in growth has begun.
Cash budget performance was strong in April, thanks to a combination of base effects, revenue resilience and relative spending restraint.
The CBRT’s May Expectation Survey showed inflation expectations continued to deteriorate further, suggesting that the CBRT has fallen further behind the curve, even as it keeps the policy rate at 19%. (For our commentary on April inflation and the MPC meeting, see posts that were sent out during the week.)
There are a number of important releases this week, like March industrial production and balance of payments data. We forecast the current account deficit at around $3.8 billion, slightly above that of consensus (of $3.6 billion).
Cosmo is taking a sabbatical on account of his self-declared Vaccination and Freedom Day and the fact that half of next week is a religious holiday in Turkey.
We wish all female members of our audience a Happy Mothers’ Day.
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