Political and Economic Update
Referendum polls are incredibly tight. AKP is worried and will pour its immense resources into winning the presidential race. Chances of unrest in case of a rejection are rising.
Ankara is picking up a fight with Iran. It is probably just a war of words, but there is possibility that the long-simmering disagreement about who dominates Iraq and Syria is coming to the surface.
In Syria, the Turkish Army and its Arab allies might have almost wrapped the al Bab operation. Next stop ought to be mixed population city Manbij, which will fight hard. Trump is not expected to help Turkey out of its Syrian conundrum.
There was not much happening on the econ front this week. Sectoral confidence indices, particularly manufacturing, rebounded visibly in February, probably on the back of a stabilizing currency and various stimulus measures, but we continue to think that the broader growth environment remains weak.
The key releases of the upcoming weak are January trade data on Tuesday and February inflation data on Friday. We know, based on preliminary data from the customs ministry, that the trade deficit should come in around $4.2 billion, which means that the 12-month rolling deficit should edge up slightly, as both exports and imports register double-digit growth rates. On inflation front, we estimate the CPI inflation at around 0.5%, based on the assumption of some moderation in food prices. If true, this would mean 12-month rate rising further to 9.7%, up from 9.2% in January. There were no consensus forecasts available to us at this writing.
Cosmo remains pretty relaxed about the markets. The rally should last for another 2-3 weeks, or even until after the referendum.
Now read on...
Register to sample a report