Weekly Tracker: March 20-26
EU and Turkey agreed on a temporary deal to swap Syrian refugees, which gives us little hope that the former takes Turkey seriously as a strategic partner. For AKP visa-free travel was the most important concession, which was conditionally granted, and might serve as a harbinger of a referendum or early elections later in the year.
Terror struck Turkey twice in one week, the second attack occurring in Istanbul’s busy shopping district Istiklal Caddesi, killing four; ISIS is believed to be responsible. We fear terror attacks are going to become more frequent and harm the economy visibly, as Turkey struggles to find the right diplomatic and security solutions. Meanwhile, Syrian Kurds just declared a federation in the North of the country, which rang alarm bells in Ankara, but unless Kurds attempt to invade the sacred Cerablus-Azez zone, Turkey is not expected to respond militarily.
A lawsuit involving Dogan Media Group boss Mr. Aydin Dogan and Is Bank Chairman Mr. Ersin Ozince concerns us deeply, as it might possibly involve their institutions.
Making the most out of the cyclical opportunity granted by the Fed, the CBRT/MPC may cut the O/N lending rate this week. We place the odds in favor of easing (60-to-40), given the supportive global backdrop, the statement made by a top Presidential advisor last week, and the Bank’s eternal easing bias that in any case gives very little consideration to poor inflation dynamics.
February budget surprised on the positive side, but this should not lead to complacency on this year’s budgetary risks. Meanwhile, labor market continues to hold up, thanks to ongoing resilience in service jobs.
Cosmo believes that the good old days in EMs are back and invites everyone back to Turkey.
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