The season of spin doctors
Upon a positive ruling by High Court of Appeals, President Erdogan quickly ordered the reconversion of Hagia Sophia to a mosque by July 24th. While Western press may view the decision as the death sentence of secularism in Turkey and sign of Erdogan’s undisputable control over Turkish politics, the truth is no one cares. Not even the opposition.
Erdogan has demonstrated with this decision, as well as other futile legislative acts such as one allowing the formation of multiple bar associations, that he is losing touch with the common people. Latest surveys and data suggest that people are becoming more frightened of the COVID-19 epidemic as well as their economic security, issues on which AKP is silent.
In foreign policy, there is some good and some bad news, but nothing that would break to the headlines. Turkey and UK may sign a free trade deal, but it is conditional on the blessing of the EU. In Idlib, Syria and Libya the threat of military confrontation between the Turkish side and a host of rivals is rising, but it is difficult to time the breaking point, or whether a negotiated solution can be found before things go sour.
On the econ side, we take a quick look at June cash budget and April labor data, which have a common thread of sorts in that, they both point to the unsustainable nature of things, i.e. unless the economy miraculously turns around in the fall, which, as you know by now, is not our baseline, things are very likely to get ugly with unemployment/economic hardship most likely soaring, and de facto monetary the financing of the deficit causing more strains on reserves/currency.
There are a number of important data releases this week, including May industrial production (IP) and balance of payments data. We don’t pretend to forecast IP, given its awfully noisy nature, but a reasonably strong rebound in both annual and sequential terms should not be surprising, while we estimate the May current account deficit at around $4 billion.
Unable to dig up more negative comments on TL denominated assets, the Cosmic Vulture turned His beady eyes to Turkish banks, predicting higher NPLs than markets may be discounting.
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