In frozen limbo
Despite warnings from the Taliban, Ankara will dispatch troops to defend the Kabul Airport, though the timing is vague. The new appointee to become the US Ambassador to Turkey, Jeff Flake, has received mostly positive reviews in the Turkish press.
There are unconfirmed reports of a deal between Russia and Turkey to pull out their mercenaries from Libya, but as long as Egypt is ready to swoop on the country, Turkey is loath to leave it to its own devices.
At home, we sense mutual disgruntlement between AKP and MHP, but a break-up is not certain -- and certainly won’t happen before late autumn. Pro-Kurdish HDP, too, has issues with its tacit partner the Nation Alliance. Turkish politics is set for a sea change beginning in the last quarter of the year, the progress of which will determine the election date.
Mafia boss Sedat Peker’s claim that Interior Minister Suleyman Soylu is arming AKP loyalists to help Erdogan to steal the election whipped a frenzied furor among secularists. Nevertheless, the politics author opines that it is too early to subscribe to such malign scenarios.
This is the year of natural disasters for Turkey. Covid-19 cases are rising once again. The mucilage invasion in Marmara Sea is threatening the vitality of precious fisheries. According to official meteorological reports, 60% of the country is in the grasp of a devastating drought, which is certain to cut crop yields, adding to inflationary pressures and modestly increasing the import bill.
Having shared our forecasts last Sunday and written about the MPC meeting during the week, there is not much new to report on the econ side.
On the growth front, May industrial production and retail sales data were released over the last week, which yielded a mixed picture of sorts with the former rising and the latter falling. This partly follows lockdown mechanics as well as the calendar, but the growth trend is down, we think, which will likely become more evident during the second half, as we’ve been arguing.
The June budget showed a bit of a deterioration over the same month of the previous year, on the back of stepped-up spending, but with the overall (annualized) deficit at around TL95 billion or some 1.7% of GDP through Q2, we reckon, it is still holding up reasonably well.
On the financial side of things, there are some modest inflows from abroad in the week through July 9; locals, this time corporates, added to their F/X holdings, while the CBRT’s (on balance sheet) net reserves seem broadly stable.
Cosmic Strategist thinks there are few threats to derail a TL-denominated asset rally through September.
Please note that we are putting our Weekly Tracker on its customary summer holiday today – a week earlier than usual, because of next week’s Bayram holiday, which will cover pretty much the whole week. The Weekly will resume on September 5. We shall, of course, continue with our updates and other reports in due course.
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