Fighting COVID by polarizing voters?

TURKEY - Report 24 May 2020 by Murat Ucer and Atilla Yesilada

Turkey is achieving steady but slow progress against the COVID-19 infestation. The virus is not under control, but a ceasefire seems to have been established, so much so that most of the social restrictions and shelter-at-home periods will be ended by end-June. Medical authorities anticipate clusters of cases in summer and a return of the epidemic in autumn/winter, however.

Domestic politics has turned into a no-holds-barred grudge match, with crackdowns, strange provocations and open threats against dissidents in the media. Many pundits claim President Erdogan is contemplating a government coup to erase the last vestiges of democracy in Turkey. We bet he won’t dare. He is losing popularity and is mindful of the infighting in his party. Stoking fear and intimidating the opposition are time-tested remedies that are being brandished again. The politics author believes that these will not help make Erdogan more popular, with the economy likely to suffer its deepest recession in a decade.

There was not much happening on the economy front last week. Having written on the MPC decision already, we take a quick look at the May confidence data and share a few quick notes on how the Qatari swap deal has affected the CBRT balance sheet.

The key release of this week is Q1 NIA data on Friday, May 29th. We estimate that the Turkish economy has probably expanded by around 1%, q/q, and 5%, y/y, which is slightly below consensus. We shall also see April trade data on the same day, which, based on the Ministry of Trade data released earlier, will show a deficit of around $4 billion in April (April 2019: $2.7 billion deficit), on the back of $9 billion in exports (a 41.4% drop, y/y) and $13 billion in imports (a 28.3% drop, y/y).

Cosmo declares the threat of a currency shock almost over for at least a month or so, thanks to the inventiveness of AKP. Yet, the price to be paid for stabilizing the currency and the outflows will be deeper economic stagnation and panicky residents.

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