Future trends, past scribblings
In this last full report of the year, we have opted for a novel format of sorts. The politics author, being the visionary of the Global Source Partners Turkey team, looks ahead and identifies 11 trends that will change the face of Turkey in the next 11 years. The econ author being the boring, chart-loving nerdy fella, looks back, and shares his scribblings on a few topics of import.
The politics essay provides the preliminary results of the author’s private passion, which is assessing change and development potential in Turkey. Some trends are widely agreed upon by Turkey watchers and supported by preliminary data, others are speculative in nature, based on the author’s research and personal projections.
On the econ side, the Turkish economy got away with a shallow recession this year, thanks to Fed, Trump and the stimulus trio. We are now looking to some 0.5% or so growth for this year as a whole, as economic activity expands around 5%, y/y, in Q4, on the back of last year’s low base. As far as we can tell though, underlying growth dynamics remains weak, which is exactly why Ankara is applying myriad of stimulus measures nowadays, and will continue to do so.
The Monetary Policy Committee reduced the policy rate by another, above-consensus 200 bps clip on Thursday. We do not think the Bank is done, with single digit policy rate remaining the overarching objective, regardless of short-term inflation dynamics.
Consumer price inflation should end the year around 11.5% up from 10.6% in November and will likely edge up further during March/April. While this is markedly better than forecasted earlier this year, stickiness in underlying inflation dynamics seems to continue. Current account balance remains in surplus for the moment, but it is slowly deteriorating in 12-month rolling terms. How the deficit would be financed, should growth meaningfully accelerate, is a big question mark, given that Turkey was unable to attract inflows even in this relatively favorable year. Parenthetically, we find claims that Turkey can grow without a current account deficit almost entirely implausible, as we see no evidence of such transformation in the data so far.Ankara may be able to bide its time a while longer, and the global backdrop is surely helping at the moment, but we are in an accident-prone environment because boosting growth through stimulus remains the only priority.
Now read on...
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