In Uncharted Waters
We concede that AKP’s Gulenist purge is mutating into an all-out crackdown on dissent, with Alevites and Kurds also coming down under the hammer.The purge is unlikely to end in the next three months, with the number of affected at least doubling from the current headlines. The magnitude of the sting operation, stretching into conservative-Islamist segments of the society, and ongoing fears of a second coup means AKP could lose control of the process. There is talk of early elections next year, but we doubt that President Erdogan would take that risk, fearing Gulenist sabotage or bad news from Syria or Iraq.
In Syria, Turkish proxies are stuck before the gates of al Bab, which might necessitate the involvement of a large deployment of Turkish ground troops. Turkey’s presence is too far from Aleppo, meaning that if the city falls to loyalists to Assad, a new surge of refugees can be expected. Ankara has failed to persuade the White House to ditch its Kurdish Syrian allies, thus can’t exit from Syrian territory. Doubling the ante, Erdogan now wants the Turkish military to aid the operation to rescue Mosul, which is deeply resented by Baghdad and the U.S. and we suspect by Tehran, as well. Yet, we feel unlike in Syria, Ankara will step back in this conflict. We see rising risk premiums as the year advances, and no solid story for Turkey.
Both the MTP and CBRT are envisaging and speaking a different kind of macroeconomics than we are seeing. We shall look at this somewhat more comprehensively later this month in the context of our Quarterly report, but we’ve nevertheless taken a first stab at it here. In summary, we find both the MTP’s and CBRT’s take on the macro developments and outlook a bit too Pollyanna-esque. This may have to change though, because investor complacency is unlikely to support us indefinitely.
Please note that there will be no Weekly Tracker today.
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