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COUNTRY INSIGHTS

Week of July 24
TURKEY · Report · 24 Jul 2016

Our political analyst is not yet ready to capitulate to the majority scenario that AKP will exploit the coup attempt to institute a more authoritarian regime. We empathize with AKP’s draconian purges given the realistic threat assessment from the Gulen Order. We first analyze the evidence for aut...

An Unsurprising Move by the Reserve Bank not to Hike Interest Rates
SOUTH AFRICA · Report · 21 Jul 2016

​The South African Reserve Bank announced today it was keeping the benchmark interest rate at 7%, meaning that the prime lending rate would also remain at 10.5%. This was the second time in a row this year that the MPC decided not to increase the repo rate (decreasing the rate has not been an opt...

State of Emergency will reveal AKP’s true intentions
TURKEY · In Brief · 21 Jul 2016

After a recommendation from the State Security Council, Turkey’s Cabinet of Ministers resolved to propose a State of Emergency to the Grand Assembly. While opposition parties CHP and HDP immediately objected to the proposal in strong terms, I think the resolution will pass easily. The State of Em...

Trying Times
ECUADOR · Forecast · 20 Jul 2016

The Ecuadorian economy contracted severely in Q1, with GDP shrinking 1.9% q/q, and 3% y/y. Despite the poor performance of oil revenues due to plummeting oil prices, the oil sector value added was still positive, at 2% q/q and 1% y/y, while the non-oil sector shrank 2.2% q/q and 2.6% y/y. Hous...

The Test of SA Democracy: August 2016 Elections
SOUTH AFRICA · Report · 20 Jul 2016

On August 3, 2016, South Africa will hold its nationwide local government elections. Since its last local government elections in 2011, much has changed in the country’s political economy landscape. The governing tripartite alliance of the ANC, the SA Communist Party (SACP) and COSATU has been to...

Economics: Weak Industrial Sales Data
MEXICO · Report · 20 Jul 2016

Industrial activity showed only moderate growth in May as production increased a scant 0.4% on a 12-month, seasonally adjusted basis. While both the construction sector (+3.2% year on year) and utilities (+6.3%) experienced very positive results, their contribution was largely offset by yet anot...

Politics: New Party Leaders in a Very Different Context
MEXICO · Report · 20 Jul 2016

The two major political parties that suffered the greatest setbacks in last June’s elections (PRI and PRD) elected new national leaders this past week as they try to reposition themselves. Both parties face a new balance of power following the elections this past June, from which the National Act...

Latest developments in Turkey
TURKEY · In Brief · 20 Jul 2016

Once again I use the opportunity of questions posed by one reader to inform our audience about the developments in Turkey. The gist my message is that normalization is long way off and the economic spill-over effects are increasing by the day. Question: Does Erdogan have full control of the armed...

Corporate tax to be reduce to 23% by 2018
ISRAEL · In Brief · 20 Jul 2016

Due to higher-than-expected tax revenues, the MOF annouced a 4bn ILS tax cut in 2017, reducing the corporate tax rate to 24% (currently 25%) and lowering income tax brackets by 2%. A further reduction of the corporate tax to 23% is planned for 2018. In the past few years Israel has maintained str...

The MNB base rate is being further demoted
HUNGARY · In Brief · 19 Jul 2016

For a longer while now, Hungary's central bank has been making remarkable efforts to reduce the significance of its own base rate, in order to gain more flexibility by avoiding potential negative political consequences if at some point it needs to raise the effective level of interest rates on th...

MPC Makes a Compromise Move
TURKEY · Report · 19 Jul 2016

The Monetary Policy Committee cut the O/N lending rate by 25 bps today to 8.75%, from 9% earlier, while the O/N borrowing and weekly-repo rates were kept unchanged, at 7.25% and 7.5%, respectively. After some 200 bps cut of the O/N lending rate, the width of the corridor remains at an all-time lo...

​MPC Preview: Between a Rock and a Hard Place
TURKEY · In Brief · 19 Jul 2016

Today’s decision will arguably be one of the most critical and difficult ones for the MPC, which is stuck between a rock (politicians’ wrath) and a hard place (fundamentals). So will the MPC be compelled to pause (after a cumulative 175 bps cut of the O/N lending rate) or will it deliver another ...

Week of July 18
BRAZIL POLITICS · Report · 18 Jul 2016

A relatively quiet week due to the “white recess” in Congress, which will resume activity in August. The municipal elections definitively enter the agenda with the beginning of party conventions to choose candidates and coalitions. We highlight the first meeting of the Copom to set the benchmark ...

Recession’s Ending Signals and Start of a Slow Recovery
BRAZIL ECONOMICS · Report · 18 Jul 2016

A large number of signs indicate that the current recession is reaching its end. The confidence indicators stopped falling at the end of last year, and since the first few months this year have been rebounding somewhat, with optimism accentuating due to the quality of the new economic team. But t...

​Growth revised upwards in Q116, PMI declines in June
ISRAEL · In Brief · 17 Jul 2016

GDP growth in Q116 was revised to 1.7% SAAR from 1.3% in the previous estimate. The main revision was export growth which currently reflects expansion of 1.6%, up from the 1.1% contraction in the second revision. This was mostly due to the updated CBS survey of service exports, conducted once a y...

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