Corona damage becoming visible
In as much as official figures may be misleading, Turkey is making good progress on eradicating COVID-19, while the government has switched to a cautious stance vis-à-vis re-opening the economy. Administration members now caution the public that Turkey will remain on emergency footing for some time to come.
It looks like the epidemic has not been kind to Mr. Erdogan. A host of polls indicate that state aid is not reaching sufficient number of the needy, while his efforts to stop CHP mayors from distributing aid are backfiring. Our “poll-of-polls” tables show a small but steady decline in AKP-MHP votes. Mr. Erdogan needs not only to end the epidemic, but stoke a rapid economic recovery, too, to avoid political fallout.
Turkey has postponed the activation of S-400 anti-missile batteries, but this didn’t suffice to appease the US; there will be no swap lines from Fed.
As April data begins to flow in, sharp contraction in economic activity is becoming more apparent. This week’s April manufacturing PMI and export data should be no exceptions. The trade deficit widened quite sharply, m/m, as exports fell markedly more than imports, according to detailed data released by Turkstat.
The key release of the week is April inflation data on Monday. There is again pretty wide variation across forecasts, with a consensus CPI inflation forecast of around 0.6%. We foresee CPI inflation slightly higher at 0.7%, based on a forecast of slightly negative food inflation. If true, CPI inflation should ease to 10.8% from 11.9% in March.
Cosmic Guy, in His characteristically provocative style, calls this week a “do or die moment” for the currency. If the CBRT can’t defend it, there are only two options, He opines...
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