Data vs reality
Idlib clashes continue, but we don’t expect full-scale military engagement until the March 5th summit among Erdogan, Putin, Merkel and Macron. Our end-game scenario still envisages Ankara battling Damascus to keep its share of Idlib.
Covid-19 is devastating Iran as we write these lines, and Turkey’s first cases may have been diagnosed in the Eastern city of Van. We won’t know for at least another week, but the virus visiting Turkey ought to be considered a central risk now.
At home, we focus on the mood and mental health of the nation, which is deteriorating according to several indicators and reports. This can’t be good for the ruling party, can it?
Halkbank and Is Bank are in the news again – and in a bad way. How will these sordid sagas end?
The budget has had a good start into the year, but there are a few caveats to take note of. We maintain our expectation of a sizeable deficit this year at around 4.5% of GDP, versus the 2.9% target.
One of the more interesting paradoxes of Turkish economic developments nowadays seemed to have persisted in February: consumer confidence retreated from already low levels, as consumer credit continued to surge.
Net reserves of the CBRT fell by another $5 billion clip last week, based on the daily balance sheet data, the anatomy of which we explore inside, various unknowns and data holes notwithstanding.
As expected, Fitch has affirmed Turkey’s sovereign rating (BB-) and outlook (stable), underlining several well-known risks, including a large external financing requirement, low monetary policy credibility, elevated geopolitical risks and institutional erosion. We felt the statement was a little fuzzy, however, when it came to its expectation of a “V-shaped” recovery in spite of all these risks, and with no particular mention of a potential backlash because of the unsustainability of the current policy mix.
The key data release of the week, among several others, is the Q4 NIA data, which will come in on Friday. Broadly in line with the consensus, we think we will probably see that Turkish economy grew by around 5%, y/y, and over 1%, q/q, in Q4.
Cosmo mumbles “the dam will break”, pointing his trembling finger at CBRT net FX reserves. Has He finally lost ALL His marbles?
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