It's crunch time, again
With three weeks left to the poll day, available evidence suggests that CHP has wind in its sails, across the nation. Of course, this is part of the natural cycle of Turkish elections, where CHP always leads only to be defeated by last-minute “policy innovations” of Erdogan. Yet, this time around, neither AKP members, nor pro-AKP pollsters are contesting the view of CHP momentum with any enthusiasm.
Emerging evidence suggests that Erdogan has not given up on Istanbul and Ankara and will probably resort to some tricks in the next three weeks. CHP is shooting itself in the foot, but the ultra-Islamist New Welfare Party needs either carrots or sticks to withdraw its candidates in tight races, such as Istanbul. At this point, the politics author is comfortable to predict that Izmir and Ankara will probably remain in the hands of CHP, but Istanbul is razor-tight. Of course, Erdogan still has two very potent fiscal promises to turn the tide and dynamite whatever is left over from Mehmet Simsek’s economic program.
Things may in fact be desperate for Erdogan, who during the week hinted at retirement at the end of his term in 2028, a trick he deployed in the past to galvanize his fan base. Yet, this time around his announcement may have more of a meaning than “fan service”. The politics author is closely watching the post-election cabinet reshuffle to find evidence about our Great Chief’s intentions. Needless to say, if he is earnest, a whole can of worms will be opened.
In foreign policy shorts, a New York appellate court will decide whether to dismiss or move on with the Halkbank case, as Minister of Foreign Affairs Hakan Fidan held talks with his counterparts in DC about Turkey’s re-admission to the F-35 joint jet fighter program.
The CBRT went back to its old ways earlier in the week, as reserve drain accelerated. Assuming pressures can be contained, relatively speaking, the CBRT will likely try to avoid a pre-election rate hike on March 21, though the situation, needless to say, is hugely fluid. As we touch upon briefly, the real effective exchange rate continued to recover from its July dips in February, but we still think “fundamentally speaking”, that the TL is not blatantly overvalued; perception or hearsay is a different matter, of course, which is an important driver of the recent F/X demand, we think.
The overall cash deficit was about TL200 billion in February, little changed compared to the same month of previous year, thanks to strong revenue performance.
Contrary to consensus expectations (though no one had probably strictly ruled it out), Fitch raised the Turkish sovereign’s rating by one notch largely thanks to Ankara’s return to orthodoxy, which now places the sovereign 4 notches below IG. S&P and Moody’s still rate the sovereign 5 and 6 notches below IG, respectively.
There are several useful and important data releases next week. A poll we saw placed the median current account deficit forecast for January at $2.6 billion, which we think might be slightly wider.
Now read on...
Register to sample a report