New week, new risks

TURKEY - Report 02 Feb 2020 by Murat Ucer and Atilla Yesilada

Another critical phase is approaching in the seemingly never-ending Syrian War. Assad’s forces captured the second largest town in the war-torn Syrian province, Maraat-al-Numan, possibly readying to lay siege to the capitol Idlib city. Speaking in Ankara, President Erdogan warned that Turkey would be unable to deal with an influx of Syrian refugees, threatening another military campaign in Idlib.

Macron threatened to send war ships to stop Turkish military deliveries, while pledging to strengthen France’s strategic bond with Greece, which is also complaining about Turkish drill ships violating its maritime boundaries. Erdogan is facing a very diverse coalition in Libya for no clear objective with no victory in sight.

Interior Minister Suleyman Soylu rang the alarm bell, alerting Istanbul-lers to prepare for a tremor of a 7.5 magnitude, which is very odd for a public official.

AKP’s structural unison is weakening by the day. This conclusion is shared by rather accurate and honest pollsters like KONDA, SONAR and MAK Agency, predicting that Babacan and Davutoglu could easily form caucuses in the Grand Assembly by recruiting from AKP. It is the high and rising cost of living that is turning voters off AKP.

Recent growth data continues to look wobbly with some good and some not-so-good news, which is probably driven by the highly ad hoc nature of the stimulus measures.

The key release of the upcoming week is January inflation. We forecast the CPI-inflation at around 1.1%-1.2%, slightly above consensus, which, if true, should increase the 12-month rate slightly higher to around 12%, from 11.8% in December.

Cosmic Strategist blames the weaker TL on Governor Uysal and predicts a new episode of a rise in CDS premiums.

Regarding our report schedule, please note that our Quarterly/Forecast report, which has been slightly delayed, should be in your inboxes next Sunday, February 9, 2020. There will be no Weekly report that day while updates, if need be, will continue in the interim.

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