Shaky economics, shoddy ceasefires
An uneasy calm prevails in the Syrian Province of Idlib, as a result of a ceasefire deal brokered by Messrs. Putin and Erdogan, which few experts expect to last. Turkey is clearly the loser in the resulting arrangement, which consolidates the territorial gains of Assad regime and keeps scared refuges at the Turkish border.
From the perspective of President Erdogan, his devotion to Putin raises deep questions about his rationality, which had been the politics author’s base case so far, because neither militarily nor economically such reliance can be justified. Moreover, Erdogan heralded that dreaded S-400s will be activated in April, raising the prospect of US sanctions once again.
The maneuver to send millions of refugees to Greece and onto EU has failed, with only 40K or so bothering to report to the border, which the Greek border patrols have repulsed rather inhumanely, while the EU has not yielded to the blackmail, refusing additional financial aid to Turkey. Whether Erdogan intends to escalate the conflict with EU or not will be determined this week, after his unscheduled and apparently uninvited (by EU) visit to Brussels on Monday.
At home, we are relieved to hear from medical authorities that no coronavirus cases have been diagnosed in Turkey, while a minor earthquake in Marmara Sea alerted us to the possibility of a bigger one which would be devastating.
The war in Idlib is unpopular, but so are Syrian refugees. As a result, Erdogan’s approval ratings are falling gradually. The reaction from the Palace is a heavier dose of repression, which had been tried and failed. Whether Erdogan acting against the wishes of the public will bring about “change” is a question we can only answer once Ali Babacan unfurls the banner of rebellion, reportedly this week.
On the econ front, we’ve provided a brief update on our latest macro thoughts – less, potential repercussions of the corona virous on the Turkish economy -- during the week (March 4, 2020). So, we just glance through the February cash budget and January trade data here, as well as share a few thoughts on CBRT’s latest tweak to its required reserve ratio rule.
It is still a bit too early to tell and data is scant, but we are looking at the channels through which the corona virus could affect the Turkish economy, about which we plan to issue a short note in a week or so.
There are a few important data releases this week. Broadly in line with the consensus, we expect to see a current account deficit of around $2.5 billion in January, which if true, should move the 12-month rolling balance to a modest deficit from a surplus of some $1.7 billion. This forecast doesn’t take into account the upcoming revisions to the BOP accounts, however.
Cosmo thinks with Idlib out of the radar and too early to talk about American sanctions, corona pricing will predominate in Turkish markets, too. He remains wary of a credit crunch, which may spread to EM and Turkey.
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