After the collapse of Geneva peace talks, pro-Assad forces redoubled their efforts to lay siege to Aleppo, pushing 70K refugees towards Turkey. As another great human tragedy unfolds in the neighbor, the fall of Aleppo could trigger a series of events that could spell diplomatic disaster for Turkey.
Former Deputy PM Bulent Arinc appears to have launched an opposition campaign against Erdogan with the support of some retired AKP heavyweights, which bears monitoring, but unless Gul and/or Babacan join the rebels, Erdogan’s supremacy will remain unchallenged. As the operations to purge the terrorists in the Kurdish townships of Cizre and Sur wind down, Premier Davutoglu unveiled a 10-point “anti-terror master plan”, which promises comprehensive human rights reform, but shuts the door to negotiations with PKK, Ocalan or HDP. We need to see more details before making the final comment, but the plan isn’t grounded in reality and could prolong unrest and insurgency.
IMF’s Article IV mission statement sounded a bit too complacent to us on this year’s growth outlook, as we discuss inside. January PMI data showed manufacturing stayed in the expansionary zone a third-month in a row, but forward looking indicators are weakening, while January cash budget showed a surge in primary expenditures, already vindicating the view that maintaining budget discipline this year will be quite a challenge.
The key data releases of the upcoming week are December industrial production (Monday) and balance of payments (Thursday) data. As we’ve written before, our current account deficit forecast is around $5 billion, which seems to be just around the market consensus.
Cosmo still hopes that the oversold EM asset class will recover “soon”, though He can’t tell which data or event might bring about the turn-around. In terms of Turkey, He insists on “outperform” despite rising political risks.
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