Hello darkness, my old friend
Mr. Biden’s declaration of the horrible events of 1915 as “genocide” puts Turkey once again in a dark tunnel, where the end is not visible. This is not a symbolic act, but an earthquake that will spread through fault lines in numerous directions. The politics section of this Weekly is dedicated to exploring possible consequences of Biden’s act, though of course more time and several more posts will be needed to grasp the full story.
The good news is that Mr. Erdogan has taken it relatively calmly so far. The bad news is that Turks and Armenians may not be so inclined. The big question is how Mr. Erdogan will break through an airtight economic and diplomatic siege. We suggest a few plausible scenarios.
There was not much happening on the econ front last week. Consumer confidence fell sharply in April, back to where it was late last year, as forward-looking indicators, unsurprisingly, started to head south.
After switching to TL from F/X during the first week of the Agbal shock by a massive $8 billion or so, residents seem to be moving back toward F/X again.
The CBRT Governor Kavcioglu spoke to three broadcasters last Friday, where he defended the F/X sales basically by citing the extraordinary circumstances of the past few years, while remaining entirely evasive and obscure on the technicalities. The econ author did go through the agony of watching the TV interview (well, most of it), but he did not cover the issue in this report, because there is really not much to add to this account by Bloomberg. Around mid-last week, President Erdogan also weighed in on the issue by saying that “they could sell more reserves if necessary”, and that reserve sales amounted to “$165 billion” in reality, not “$128 billion” (link here). The President provided a breakdown of sorts, but we did not think it quite added up.
Bottom line? This is all very alarming, to say the least, because it shows once again that Ankara has yet to comprehend the gravity of the situation and come to terms with reality.
The key attraction of the week is the year’s second Inflation Report presentation, which should lead to a material upward revision of the yearend inflation forecast of 9.4% (mid-point). There are also a number of relatively significant data releases, including March trade data from Turkstat. As we already know from preliminary data, the latter should come in at around $4.7 billion, reducing the 12-month rolling deficit to some $47.9 billion from $48.7 billion in February.
Cosmo claims the genocide story is already priced in, but Turkey’s unfolding crypto debacle requires caution.
Now read on...
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