S-400 saga continues
Amidst a torrent of contradictory news, the only concrete progress in S-400 crisis is a summit between Presidents Erdogan and Trump at the upcoming G-20 meetings at end-June in Osaka, Japan. Yet, we surmise Ankara may be inching towards postponement of delivery.
At home, the Istanbul race is lacking the high-wire tension and drama we had expected of it, with all publicly available polls showing Mr. Ekrem Imamoglu in the lead. Yet, we shall wait for President Erdogan to try his magic on the constituency after the Eid holiday before declaring the contest over.
After a particularly nasty EU Turkey Progress Report, Erdogan unveiled a Judicial Reform Strategy, which was immediately dismissed as “old hat” by the opposition. We beg to differ, arguing that the President taking ownership of human rights reform and judicial independence is significant. As well, MHP leader Bahceli promised unqualified support, strengthening its credibility.
As we’ve reported on Friday (Recession Over – For Now, May 31, 2019), the Turkish economy grew sequentially in the first quarter of the year after two consecutive quarters of contraction during the second half of last year. But, as we’ve briefly explained in our note, we continue to think we are faced with a bumpy ride ahead. As a matter of fact, the Economic Confidence Index slipped significantly in May, suggesting that the economy has yet to recover itself from a stagnation-cum- low confidence trap.
Next week’s key data release is May inflation -- along with May manufacturing PMI data, both of which will come on Monday. Broadly in line with the consensus, we expect the CPI-inflation at 1.2%-1.3%, which, if true, would reduce the 12-month inflation to some 19.1%, from 19.5% in April.
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