Beware the Ides of March
February started poorly for Mr. Erdogan and his AKP-MHP alliance, turning into a rout by the end of the month. The administration couldn’t deliver any tangible progress on the economy or the COVID-19 epidemic fronts, with bigger defeats occurring in the political arena, where to quote one savvy source, “Erdogan was forced to play defense first time in 20 years”. March is shaping out to be even worse…
Mr. Erdogan made a wise decision to defend his son-in-law, the politics author believes, because Mr. Albayrak is the weak point on AKP’s defensive perimeter. If the enemy breaches the defenses there, more AKP policies and the performance of several ministers will be brought up to the national agenda. Yet, we don’t have sufficient evidence to conclude that President Erdogan intends to rehabilitate Mr. Albayrak.
The biggest downside surprise in foreign policy in March may emanate from the Halkbank trial, suggests der Spiegel. There is still no contact between the White House and the Palace, which may be by design to soften Erdogan’s defiance.
The CBRT hiked the required reserve ratios on TL deposits last week by about 200 bps, but the basic cost-benefit calculus –a poor signaling effect weighed against a trivial policy tightening effect – suggests that the Bank should not have bothered with this now, at least not during a time of TL turbulence.
Last week’s February Economic Confidence and PUMAX indices, the latter a local counterpart to PMI, suggest that growth is holding up still, but the momentum loss is also becoming fairly apparent.
The trade deficit came in at $3 billion in January, broadly in line with the Ministry of Trade data announced earlier, which reduced the 12-month rolling deficit to $48.4 billion from $49.8 billion in December, but it is worth noting that this was about improvements in energy and gold balances, as “core” import growth, y/y, continued to slightly outpace “core” export growth.
There are a number of important data releases this week, including, most notably, NIA Q4 (Monday) and February inflation (Wednesday) data. Broadly in line with the consensus, we see annual growth at around 6-7%, y/y, and CPI inflation at around 0.7%. If true, these would leave us with over 2% growth in 2020 as a whole, and lead to a slight increase in CPI-inflation to 15.4%, from 15% in January, respectively.
Cosmo returns with another hodge-podge of barely comprehensible ideas, but He seems to be saying “make sure to locate the exit sign”.
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