Weekly Tracker: Mar 27-Apr 2
PM Davutoglu announced that AKP’s draft Constitution will be presented to parliament by late May/early June, which means a general floor vote on a nation-wide referendum. We go further and claim that a snap election is a serious possibility.
An American prosecutor ordered the arrest of Turkish-Iranian businessman Reza Zarrab on charges of violating the U.S. sanctions on Iran and money laundering. The same person was briefly detained in Turkey in 2013 and charged with bribing ministers and their relatives for the same purpose, which led to the impeachment procedures on 4 ministers. If Zarrab plea-bargains, unpleasant truths about AKP’s involvement in the illicit gold trade to Iran and corruption in the party might once again come to surface, or the U.S. might use the information as leverage to alter Turkish policy.
The EU-Turkey refugee deal seems to have reduced the migrant flow to Greece, but there are huge doubts on the Turkish side whether the EU would keep its promise of a visa waiver by the end of June. On the other hand, we report further progress in Cyprus peace talks.
Pushed back in Syria and Iraq, ISIS will attack in Europe and in Turkey. PKK has asked for a ceasefire in return for the resuscitation of the Peace Process, but its actions belie its intentions. We are concerned about more terror attacks in Turkey.
The key releases of the week are the Q4 GDP and February trade data.Available growth indicators send mixed signals on the former, but some 4.5% growth, y/y, in Q4 and around 3.7%-3.8% for the year as a whole seem to be the most likely outcomes. The trade deficit should come in at around $3.2 billion in February, as indicated by the Ministry of Customs and Trade data released earlier in the month.The 12-month rolling deficit should thus drop to some $61.2 billion from $62.7 billion in January, mainly on the back of a lower energy bill.
We review a few of the data releases from the past week -- Q1 growth indicators, 2015 employment figures, and CBRT’s March expectations data -- inside. In a nutshell, growth seems to have lost momentum in Q1, the unemployment rate has crept up in 2015 over 2014, and despite a modest improvement, inflation expectations stay far off the 5% target, as well as at their highest levels since the global crisis.
Cosmo foresees rising political and economic risks in Turkey and advises readers to take profit, unless Erdogan and Davutoglu reach agreement on a decent CBRT head soon.
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