Three Weeks of the Condor
Domestic politics has deteriorated into a farce, as a Mafia leader takes on the Interior Minister with Erdogan’s silent consent. We generate several scenarios about Erdogan’s silence and the endgame in this docu-drama. A new deal for up to 90 million does of BioNTech vaccines could end Turkey’s epidemic by mid-autumn, offering Erdogan an escape route from this chaos via snap elections. What if he doesn’t want to use the escape hatch?
Diplomacy has withered on the wine, as chaos killed any vestiges of pragmatic and longsighted policy making in the Palace. Yet, we can plainly see that there are no positive developments. The reset with neighbors has stopped in its tracks. Putin has a problem with Erdogan, but what is it exactly? We come up with a few alternative answers. The public bickering between Ankara and White House during the week bodes ill for the upcoming Erdogan-Biden summit, but does Erdogan really have a choice except to toe the American line?
Consumer confidence continued to slide through May, while the budget continued to hold up through April.
Ankara raised the special consumption tax on fuel oil apparently with a view to reversing the drain on the budget, which, roughly speaking, should add some 0.3-0.4 pp to (mostly) June inflation.
Turkstat will release April trade data this week, which, based on the preliminary release earlier in the month, should show a trade deficit of around $3.1 billion, thus reducing the 12-month rolling deficit to $46.4 billion from $47.9 billion in March, while S&P will conduct its regular review of Turkey’s sovereign rating. As regards the latter, we do not expect any change in rating, but outlook may move to negative. Recall that S&P keeps Turkey 4 notches below Investment Grade (IG) with a stable outlook, Fitch 3 notches below IG with a stable outlook and Moody’s 5 notches below, with a negative outlook.
Cosmo says 3 critical events in the next three weeks will seal the fate of Turkish assets.
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