Populism at home, sanctions abroad
The S-400 crisis entered the next phase, with Ankara beginning to take delivery of some parts, as the Bloomberg claimed that the White House shall announce sanctions in the coming week. This is not the final scene. The politics author believes that Ankara still belabors until false hopes and mistaken assumptions about the nature of the conflict, which is likely to be cured in the course of the summer.
EU, too, is poised to slap sanctions on Turkey because of its drilling activities in the Exclusive Economic Zone of Cyprus, which the former treats as the sovereign territory of Greek Cypriots. Ankara’s very measured response to upcoming sanctions suggest Turkey doesn’t dare to abandon the Western Alliance yet. On the other hand, we warn our readers that Turkish press sources claim the military getting ready to invade North East Syria, which would magnify all existing political risks.
At home, pollsters began speculating about Ali Babacan’s chances of survival in the cut-throat world of Turkish politics. Polls or opinions about his support range anywhere from 4-20% but all experts agree that unless Erdogan boosts economic growth soon, Babacan, and perhaps even CHP Istanbul mayor Ekrem Imamoglu will gain strength at his expense.
May industrial production data was encouraging, but the details were less so. The current account deficit continued to shrink in May in 12-month rolling terms, as predicted, which now stands at some $2.4 billion, sharply down from a peak of almost $58 billion a year ago. On the financing side, financial account was in surplus in May, but rather than non-resident money, it was mostly driven by asset drawdown by resident banks or F/X reserves changing hands between local banks and the CBRT.
Fitch pushed Turkey further into junk territory last Friday, further attesting to the growing divergence between how Ankara sees things, and how the outsiders – IFIs, rating agencies, real money investors, etc. -- do.
Cosmo doesn’t fear a large sell-off in Turkish markets, unless the CBRT cuts rates “big” and Fed ends easing with one rate cut. The real ruckus is due September, according to Him.
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