Weekly Tracker: April 10-16
Erdogan and Davutoglu frequently clash in front of the public nowadays, which suggests that Turkey’s two-headed administrative set-up is not sustainable. The question is whether Erdogan would replace Davutoglu, or the latter would rebel against him. If Erdogan doesn’t move, the failure of the Constitutional referendum could embolden Davutoglu to take the first step of the leadership battle.
The opposition parties MHP and HDP are in a flux, too. MHP might be forced to an extraordinary convention to elect a new leader, while the parliament is on its way to remove the immunities of several HDP deputies. According to three polls commissioned by HDP, the standings of the 4 main parties haven’t changed much since the last elections while only 36% of the population supports an Executive Presidency.
The war against the PKK is reaching alarming proportions, as ISIS is soon to be removed from the Turkish border in Syria. New terror attacks are to be feared. Diplomatic reconciliation talks with Israel are dragging on, while we neither anticipate a full-scale war in Nagorno-Karabakh, nor a visa waiver for Turks in EU at the end of June.
Industrial production (working day-adjusted) expanded by a robust 5.8%, y/y, defying growth skeptics, such as ourselves, but data should get weaker in the coming months, as suggested by a host of other indicators. Cash budget showed another surge in primary expenditures, leading to a sharp deterioration in March, while Moody’s decision – to keep Turkey’s rating intact – was not much of a surprise.
Looking ahead, the key data release of the week is February BOP. We forecast a current account deficit of around $2.1 billion, which, if correct, should drive the 12-month rolling deficit lower to $30.7 billion, from $31.9 billion in January.
Cosmo is alarmed that investors have grown too comfortable with idea of a current MPC member replacing CBRT Head Mr. Basci. Erdogan might insist on an “unorthodox” name, causing market panic.
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