March spells survival of the fittest
The politics author hereby presents his preliminary predictions for local elections. In a nutshell, things are not looking good for President Erdogan at the moment. Ankara may have already slipped out of his grasp, while AKP candidate Kurum’s chances in Istanbul are no more than 50% in his view. Of course, Erdogan has several potent weapons to deploy in the coming days. He is urged to be more generous to retirees, but that could be a disaster for the government budget.
Turkey’s business community is buffeted by several shocks, and there are indications that it is partly putting the blame on the Finance and Treasury Minister Mr. Mehmet Simsek. According to a seasoned Ankara reporter, calls for Simsek’s head are already mounting. How realistic are these claims? Not totally unrealistic, says the politics author, but the bar to sack him is high, he contends.
After a surprisingly strong Q4, sequentially speaking, last week’s growth indicators suggest that growth is likely hovering in positive territory in this quarter as well. The final January trade data from Turkstat was encouraging, as it showed another month of surplus in the core trade balance (seasonally-adjusted), but this was reversed, we reckon, in February, with core balance slipping into a notable deficit, based on preliminary data released over the weekend.
On the reserves front, developments are not particularly auspicious. Gross and net reserves declined substantially again in the week through February 23, we estimate, with further deterioration during the 4 days of the past week.
The key data release of the upcoming week is February inflation on Monday. We concur with the median forecast of some 4%, m/m, increase in CPI. If correct, this should raise the 12-month rate by about a percentage point to just over 66%, from just under 65% in January.
There is also Fitch review on Friday, which should be announced after market close. An upgrade of outlook to positive from stable is quite likely, we think. We wouldn’t rule out an increase in the rating itself, which is currently 5 notches below IG, but that is much less likely.
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