Political and Economic Update
In the presidential referendum polls, NO gained a slight edge first time since we began tabulating them. This is partly because pro-AKP agencies still refrain from publishing their results. We believe the race is breathtakingly close. While AKP still has the means to score a last second victory, the result is largely a coin toss going forward. We advise our readers to contemplate the consequences of an Erdogan defeat.
As Erdogan continued to hurl invectives in the direction of EU, as well as threatening a Tur-xit, we read the first evidence of the latter debating the possibility of imposing economic sanctions. The relationship is broken and Erdogan’s possible efforts to repair it after the referendum might fall on deaf ears.
Turkey is about to enter a unique era in foreign policy where its strategic allies, namely the EU, U.S. and Russia are either pursuing or about to adopt policies antagonistic to its vital interests. Unless a course correction takes place in Ankara, isolation and the economic malaise might deepen.
There is not much to report on the econ side, so we let the charts and tables speak for themselves inside. Consumer confidence recovered somewhat in March, according to TURKSTAT data, but remains repressed by historical averages. A quick glance through the monetary indicators show that credit growth seems to have peaked, residents built up significant F/X deposits in the week of March 17th, net foreign assets of the CBRT recovered somewhat, the CBRT continued to tighten liquidity conditions and raise short-term rates, but lending rates, puzzlingly, budged little.
The key releases of the week are Q4 NIA and February trade data, both of which will be released on Friday. There was no consensus forecast available to us at this writing, but we estimate GDP might have bounced back in Q4 at a rate of 2%-2.5%, y/y. According to preliminary data (from the Customs Ministry), trade deficit was $3.7 billion in February, which means that the 12-month rolling deficit must have increased to some $56.9 billion from $56.5 billion in January.
Cosmo argues that Turkish markets will decouple from the rest of world, minding the referendum from now on. But, what will they do?
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