Political and Economic Update
The politics section has been penned before AKP’s Extraordinary Convention where President Erdogan was expected to make a major policy speech. The first essay is dedicated to explaining why it is hard to take promises of a more liberal order or more democracy seriously. Erdogan’s primary objective is to shake up the party and the bureaucracy to secure absolute loyalty to his personage and to prepare for a “Great Leap” in the economy, which will be based on experimental ideas and debt-financed mega-projects.
The Trump-Erdogan Summit was bust, but both sides decided to sleep over their differences. Erdogan would not spoil American plans in Syria. Yet, Turkey’s Syrian dilemma of a budding Kurdish state hostile to its interests remains intact. The other Trump story that involves Turkey is the allegations surrounding Gen Flynn, who might have been on the Turkish payroll while he advised the Obama administration not to announce the arming of the Kurdish militia in Syria, in a clear conflict of interest.
On the econ side, the budget continued to deteriorate in April, as signaled by cash data earlier, on the back of surging primary expenditures and declining non-tax revenues; the unemployment rate edged down slightly in February thanks to service and construction jobs, likely driven, at least in part, by government subsidies; inflation expectations continued to deviate from CBRT’s latest forecasts and the authorities backtracked from the idea that the planned ‘Bank Certificate’ could possibly be purchased by the CBRT as well.
Cosmo is amazed at the durability of the EM, which survived the Trump and Temer shocks during the week, while Turkish markets remained nonplussed at President Erdogan’s failure to persuade President Trump to do Turkey’s bidding. The risk-on rally has few fundamental reasons, but a lot of durability.
Now read on...
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