Words vs. deeds
At home, President Erdogan ordered gradual and locale-by-locale re-opening of the Turkish economy in March, which is an extremely risky gamble in the face of 7.5K new cases per day and still not enough vaccines at hand. He is counting on 105 million doses of some type of vaccine to become available by the end of April and is under very severe pressure from the business community to ease COVID-19 restrictions. It is not wise to count out Erdogan’s phenomenal luck, but this gambit is more likely than not to instigate a very costly “third wave”.
A campaign against PKK stronghold on top of Gara Mountain range in Iraq may have been a military success of sorts, but resulted in the brutal execution of 13 Turkish captives. AKP-MHP’s effort to pin the killings on pro-Kurdish Rights Party HDP has failed, with the entire opposition uniting in blaming AKP-MHP. Messrs. Erdogan and Bahceli seem to be getting along famously, but the cracks in the coalition are also visible.
Erdogan stated over the weekend that he wants good relations with the US, but acts to prove this intention are not forthcoming. To the contrary, jingoistic behavior in Syria and Iraq as well as a hardening crackdown at home against the opposition is irritating Turkey’s diplomatic partners. The West may still attempt to “contain Erdogan”, but he is unlikely to use the window of opportunity to modify policy at home. At the end, a costly and public clash still seems inevitable to us.
Consumer confidence rose further in February, but once again mostly on hopes that the future will be much better than the present -- well, good luck with that…
The budget weakened markedly in January over the same period of last year, but that is almost entirely due to last January’s high revenue base, associated with CBRT profit transfers. Tax revenue growth looks buoyant, but primary spending remains elevated, too.
F/X deposits including gold rose by a relatively visible $2.7 billion in the week through February 12th, but this is again partially explained by valuation, while households’ F/X deposits appear to have changed very little.
In a not so surprising decision, Fitch upgraded Turkey’s sovereign outlook from negative to stable, as it kept the grade three notches below IG.
Looking to upcoming data releases, the January trade deficit should come in at around $3.1 billion, based on the Ministry of Trade data released earlier in the month, which should reduce the 12-month rolling deficit to some $48.5 billion, down from $49.9 billion in December.
Cosmo is taking the week off, on account of having nothing new to say.
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