Weekly Tracker: June 5-11
An Armenian genocide bill that was passed by the lower chamber of the German parliament hurt Turks’ feelings, but it is unlikely to lead to substantive sanctions by the government. On the other hand, the Refugee Deal is dead and Turkey-EU relations are unlikely to be a matter of economic or market discussion for the foreseeable future.
Turkey’s Syrian border is under attack by pro-PKK Kurdish liberation forces and the ISIS. There are several scenarios about the endgame, none of which too pleasant for Turkey. We expect more terror and ethnic separatism.
AKP is yet to introduce legislation for an Executive Presidency, or a party-affiliated Presidency. Recent polls show insufficient support for an Executive Presidency, while AKP might be waiting for the dust to settle at the nationalist MHP by July, before making a move. There is a good chance that the whole issue will be deferred to the autumn session of the Grand Assembly, but it will not go away.
As we’ve reported on Friday, which we do not reproduce in this Tracker, inflation data – though one could raise several caveats about it – is benign enough to pave the way for another 50 bps reduction of the O/N lending rate, we think, as long as the lira does not wildly weaken by then.
Manufacturing PMI was below the critical 50-mark for a third consecutive month in May, while credit growth is yet to pick up. Twelve-month rolling trade deficit narrowed by about $0.8 billion in April, and preliminary data suggests it might have widened by another $1.8 billion in May, though core deficit is acting somewhat more wobbly, largely because of gold trade.
The key release of the upcoming week is Q1 GDP data.As discussed in our monthly report last Sunday, we estimate GDP might have expanded by some 4%, y/y, a wide margin of error around our estimate notwithstanding.
Despite the buoyant rally in Turkish assets in June, Cosmo predicts a Perfect Storm for the summer. Read on to find out why.
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