Turkey, the Blade Runner
With our deepest apologies, we’ve decided to put off the publication of our quarterly/forecast report until next Sunday in order to monitor the developments of this week, see a few important data releases (e.g., March industrial production, April budget) and most importantly, sharpen our baseline scenario as best as we can under the circumstances. So, this Weekly Tracker is mainly on politics – or the baseline scenario of our political analyst, more specifically-- though we do share a few thoughts on last week’s economic developments as well.
The politics section, as noted, is dedicated to explaining the baseline scenario for the next six months. A second wave of COVID-19 outbreak remains a substantial and extremely damaging risk, which could deepen the ongoing economic stagnation. President Erdogan is re-opening the economy too early for comfort, with several medical authorities warning that the virus is not under control. A second risk is political instability, as relief is not reaching the needy. Polls provide only partial evidence of a drop in support levels for Erdogan and AKP-MHP, however, in our base-case scenario the twin shocks of more COVID-19 outbreaks and a failed economic recovery are expected to change their fortunes for the worse.
In foreign policy, there are shy gestures to normalize relations with the US, though these will probably not get in progress until President Erdogan realizes that without financial aid he can’t steer the economy to a recovery. The situation in Syria remains calm, and may remain so for a long time, because of our suspicion that both Putin and Assad are focused on taming the epidemic in their countries. In the continental waters of Cyprus, oil majors pulling out of exploration on account of corona concerns reduced the specter of frictions with the Greek Axis, EU, and US. In Libya, Turkey-backed al Sarraj is winning against General Haftar. These positive developments thin down downside risks to our baseline scenario, but it is hard to forge a positive Turkey narrative out of them.
On the econ front, we quickly look at last week’s developments in the F/X market, the April PMI and cash budget data. Regarding the upcoming releases, we forecast the March current account deficit at around $4.9 billion (as we had reported last week), which is quite a bit higher than the median forecast (around $4.3 billion), mainly because we see a relatively elevated outflow through the investment income account, and a relatively sharp drop in transportation services.
There is no Cosmic this week, as His Highness has shared His precious thoughts in a separate post during the week already.
Now read on...
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