Not much to write home about
Despite the next domestic elections being two-and-a-half years away, and AKP-MHP showing no interest in early elections, Turkish politics is turning chaotic. We try to make sense of the rapidly changing dynamics, but confess that our explanations are subject to a wide band of error. It seems President Erdogan is stuck at home and abroad, and may be looking for new partners to abandon MHP, which is dictating policy nowadays.
Reforms are delayed on account of the likely disagreements within the alliance, while MHP is becoming more belligerent by the day. Meanwhile, no matter what the official data says, citizens of Turkey are feeling poorer by the day, less secure about their economic future and less hopeful that their hero Erdogan will set things right.
The good news is that daily COVID-19 cases have declined to under 6K from a peak of some 35K late last year, but the mutant strains are now spotted in Turkey, too, as new vaccine deliveries are being delayed. Turkey may stay in a quasi-lockdown state for another two months, which could make a significant addition to the growing ranks of the unemployed, while wiping out a good chuck of the SMEs operating in the service sector.
In foreign policy, Ankara is staging a charm offensive to the US-EU duo, but it is not backed by promises or even hints of policy change. So far, Turkey’s diplomatic counterparts have not taken these overtures seriously.
Regarding the MPC, the amendments in the statement in a more hawkish direction --namely the inclusion of the phrases “extended period” and “additional tightening” (if need be) – are welcome. But an opportunity has been missed, we think, because an actual hike, aside from being necessary on economic grounds, would help to restore some of the Bank’s autonomy in the market’s perception, coming on the heels of verbal interventions by the Palace and the business community the week before (see MPC: Words vs. Actions, Redux, of January 21, 2021).
Inside, among a few other matters, we make a few observations as to how the headlines can be somewhat misleading nowadays, with examples from last week’s January consumer confidence data, and the “drop” in F/X deposits in the week through January 15th.
In terms of the upcoming attractions, in line with the preliminary data, the December trade deficit should come in at around $4.6 billion and the CBRT, in the first Inflation Report of the year, should keep its yearend forecast (mid-point) reasonably close to 9.4%, i.e., around the forecast of the previous (October) report.
Cosmo is bored about repeating the mantra “All is well until March, when Biden rides into town”.
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