Turbulent politics, fuzzy economics
Turkey’s order for new F-16 jet fighters and upgrade kits are in jeopardy, as Senator Bob Menendez threatens to block them. Assad laid out two conditions for peace with Ankara, to which Erdogan shall not be able to oblige. This deprives him of a minor propaganda asset.
Erdogan and Bahceli have agreed on late-early elections, which shall now be held no later than May 14, 35 days before the regularly scheduled date.
The politics author remains committed to his base case election scenario of an opposition sweep of the presidency and the parliament, but this week he chose to consider the implications of the scenario of cohabitation, to help the thought processes of our audience who remain skeptical of his views. In one sentence, the outlook is very dire under an Erdogan presidency and a hostile assembly.
The divergence between industrial production and retail sales, something that became evident particularly during the second half of last year, continued through November, with the former stagnating and the latter expanding. Net/net, GDP growth might have stayed in positive territory in the final quarter of the year, we reckon.
The unemployment rate was unchanged at 10.2% in November, but job growth was relatively strong, and the labor force increased.
The current account deficit came in at $3.7 billion in November, lower than consensus estimates, but the 12-month rolling CAD nevertheless rose to $45 billion, from $43.4 billion a month earlier, while the financing – of the CAD as well as some $3.6 billion build-up in reserves – came chiefly from resident banks, suggesting that the financing picture is more fickle than the headline figures suggest.
Turning to recent reserve developments, gross reserves fell by another $1 billion or so, we reckon, during the 4 days of last week (for which we have the data for), after some $2.4 billion drop in the previous week (through January 6). Net reserves were broadly stable during these 4 days, but we saw a substantial drop the week before by some $3.7 billion.
According to the CBRT’s first expectation survey of the year, participants forecast solid growth with disinflation this year, and some real appreciation as well as a modest hike of the policy rate. We will share our thoughts on the macroeconomics of 2023 in a brief note we plan to release next Friday, or Sunday, at the latest.
We do not expect any change at this week’s MPC meeting, but the game of whack-a-mole under the Bank’s so-called liraization strategy should continue, as this weekend’s latest intervention --targeted at increasing the allure of TL deposits and attract some F/X deposits from abroad -- attests to.
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