It was sort of a dull week, for a change
Domestic politics are utterly boring for investors and multinational businesses, and suicidally depressive for those who make a living covering them. The never-changing fact of life is the steady decline in poll ratings of AKP+MHP, attended by ever-less effective attempts to spin the agenda to improve their fortunes. The opposition has learned the tricky trade of stealing the limelight from the administration, which should hasten AKP+MHP’s decline in the polls.
In diplomacy, the verbal slugfest between the foreign ministers of Turkey and Greece seals the fate of Turkey-EU relations. Nothing else needs to be added. Biden continues his “ear-blasting silence” policy towards Erdogan. There are early signs of a reset with Egypt, though it needs to be seen whether Erdogan can stay the course. Canal Istanbul emerges as a new source of friction between Turkey and Russia, which is much more important than Syria and Ukraine.
Things were relatively calm and dull on the economy front as well. As we’ve reported during the week, the CBRT has done the expected, broadly speaking, by keeping rates unchanged, but at the same time turning visibly more dovish.
We have also seen several data releases. Industrial production data showed that growth momentum slowed further in February but remained in positive territory, while the labor market stayed in dismal state with the headline unemployment rate rising visibly, as people --especially women -- began to seek jobs actively, but could not find any. As expected, the current account remained in sizeable deficit in February -- incidentally, this will likely be the case in March and April as well—and was again partly financed by unidentified inflows.
In contrast, the budget figures for March had some good news, with the overall deficit shrinking to some 2.2% of GDP, we estimate, from 3.4% at the end of 2020, on the back of strong revenue performance, tax and non-tax.
Meanwhile, the opposition parties have turned CBRT’s recklessly and opaquely executed sale of F/X reserves over the past two years into a popular campaign of sorts, agonizing and flabbergasting the Erdogan administration. We took a quick look at the numbers inside.
Cosmo claims geo-politics and COVID-19 gap will keep Turkish rates and CDS premiums high.
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