Weekly Tracker: November 8-14
We start with a very brief overview of the post-election scene. We recap the reasons for AKP’s victory, review the timeline before a new government is formed, and speculate on what we should expect on the economy side of things. As regards the latter, it is too soon to comment on the nature and the composition of the economic team, or who will be the new economy “czar”. Regardless, we think it will be very difficult to tidy up the policy framework and provide a coherent reform perspective, given the stark differences between the two worldviews on what needs to be done next – the so-called “New Turkey” view and the more traditional/orthodox view.
In the meantime, the economic agenda is dominated almost solely by the envisaged increase in the minimum wage for next year, planned at a whopping 30%, in line with AKP’s pre-election promises. That, of course, is the last thing the economy needs, or we should be debating.
The key data releases of the week were inflation, cash budget and (preliminary) trade balance -- all for October.As we’ve already commented during the week, the 12-month CPI inflation declined to 7.6% from 7.9% a month earlier, thanks to softer food inflation, but underlying or trend inflation – gauging from the highly elevated levels of core and service inflation – is poor, pointing to, besides lira pass-through, stickiness in inflation dynamics.
Cash budget showed a reversal of previous month’s surge in primary expenditures, but the pace of expenditure growth nevertheless remains high. As for the trade balance, we should see another sharp drop in the 12-month rolling trade deficit in October, largely driven by, as usual, the energy deficit, but the core deficit seems to be shrinking, too.
The key data releases of the upcoming week are industrial production (IP) and balance of payments, both for September. We do not offer forecasts for IP because of the erratic nature of the data, but we estimate that the 12-month rolling current account deficit should shrink by about $3 billion to around $40 billion, thanks to $0.6-$0.7 billion surplus in the month.
As many of you have noticed, our politics expert-cum-Cosmic Strategist has been absent for about a week for family reasons.We as the Global Source Turkey team are grateful for your understanding. He will return shortly.
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