Taşıma suyla değirmen dönmez*
The key questions of near-term Turkish macroeconomics, which we’ve all been grappling with for some time, are unchanged. Can Ankara avoid another major “currency event” until May 2023 -- the date we now think the elections will be held -- and if it can, could it also tangibly turn the economy around?
Despite a “good” summer, during which reserves rose unexpectedly and the TL remained relatively stable despite the current account staying in deficit, we have not changed our views. We think the summer tranquility owed to various sorts of inflows mainly from Russia, which might have bought some time for Ankara – hence, our title -- but without changing the endgame. We still think a currency event is highly likely before May 2023, and even if this is somehow avoided, the economy is likely to be in worse shape then, than it is now.
The current “equilibrium” is unsustainable for both economic and political reasons. On the economy front, as Ankara tries to boost growth, the balance of payments needs should remain elevated, with large current account deficits prevailing in the winter months combined with some net loan payments by the private sector, leading to reserve losses -- and ultimately, another financial panic. On the political front, with the election campaign already in full swing, we expect a very turbulent and even violent winter. In the end, our base-case political scenario – a lot of turbulence followed by an opposition victory in the elections – remains intact.
Now read on...
Register to sample a report