No rest for the wary in the summer
As summer heat fries brains and saps all physical energy, our valiant politicians are sweating hard to make use of the dormant summer months.
During the week, three Turkish administration sources for the first time ever expressed determination to resolve the S-400 barrier to the lifting of CAATSA sanctions. But how and so what?
Ending another pet peeve of Turkish pundits, CHP’s elected leader Ozel will probably make the fateful decision to launch a new party before end-July. Does the next party have any chance of electoral success, and what will happen to Ozel?
Erdogan’s close lieutenant Mr Hayati Yazıcı stated that Turkey will draft a new constitution and present it to a national vote, which means no early elections are on the horizon.
Production indices presented a mixed picture in May – and April-May combined declined over the previous quarter, broadly speaking, but we’ll need to wait for June, to make a better educated guess on second quarter performance.
As heralded by the cash data, the accrual budget also improved in June, after a dismal May, thanks to a sharp rebound in tax collections, but also thanks to relative spending restraint.
The current account deficit was a higher than expected $1.5 billion in May, with the 12-month rolling deficit widening somewhat, while external financing was weak, with almost $2 billion in outflows, resulting in reserve losses.
But reserves seem to be holding up in recent weeks. After edging up further in the week through July 10, gross international reserves were broadly unchanged, while net foreign assets rose by some $1.6 billion during the three business days of the past week, we estimate. This excludes the negative valuation effect associated with the decline in gold price during this time.
Finally, as expected, Fitch did not change the sovereign rating or the outlook last Friday, stating that Turkey’s ratings are constrained by its “record of very high inflation, low external liquidity relative to high financing requirements, weak governance, and repeated episodes of political interference in monetary policy”.
Looking ahead, the key attractions of the week are the MPC meeting on Thursday and a Moody’s review on Friday. We do not expect a change in either’s stance, the former being, parenthetically, in line with a consensus poll we saw. The MPC statement might convey some clues about the shape of things to come, like whether the Bank intends to reduce the funding rate from 40% currently, for instance.
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