Health and economic anxiety escalating
Turkey begins a critical week in its battle against the COVID-19, as the rise in patients reach the stage of explosive growth. At an estimated rate of cases doubling every three days, Turkey could report as many as 30K patients by the end of next week, which would overwhelm the health system. President Erdogan must declare a nationwide curfew, which appears to be the only effective remedy against the spread of the outbreak, and then again, only in some countries and over time.
Judging by the ever-tightening restrictions on free movement of people, he is likely to take that fateful decision. Yet, there are many reasons to think that a curfew would not be watertight. Turkey must prepare for a very lengthy war against COVID-19, for which it may lack the collective mental and economic stamina.
Another vector of infection and source of financial strain and public unrest is blowing in from Syria, where the Idlib Province is at the precipice of a corona disaster.
At home, surveys suggest COVID-19 and economic distress have become the topmost concerns of participants. Erdogan and his AKP-MHP coalition will be judged on their ability to soothe these twin anxieties.
On the economy side, growth data begun to head south, starting with the March Economic Confidence Index last week, but this is most probably just a beginning. We should brace for a very steep contraction in the second quarter, and arguably in the third quarter as well, before economic activity hopefully rebounds in the final quarter of the year. This week’s March PMI and SAMEX indices should give us more hints, though both are very likely to slip back into the (sub-50) contractionary territory.
We’ve been frequently reporting on this issue, but it is our obligation to do so again -- that the drain in CBRT reserves has taken very alarming proportions. According to data just published by the CBRT, the Bank’s “short-position” rose by another $7 billion in February (over January), which brings F/X sales in the year to date to at least around $25 billion by our calculations. We provide a quick primer on how we get to this figure inside…
The key data release of the week is March inflation, which is one of the hardest inflation number ever to forecast because of the COVID-19 shock. We are close to the median (CPI inflation) forecast of 0.5%, which, if true, should reduce the 12-month CPI-inflation down to about 11.7%, from 12.4%. But we think risks to this forecast are on the upside.
In a separate corporate news section, we attempt to compile our informal “Beige Book” of sorts and report on the economic state of affairs in some key sectors.
Cosmo is frank. There is no hope for EM, or TL assets.
Now read on...
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