Page 8 - TURKRptMay19

Resident real persons relentlessly increased their FX deposits for 25 consecutive weeks from October 5 to March 29 before limitedly retreating in the following two weeks.
Despite liquidity easing in fiscal expenditures and public banks’ lending, it seems the shrinkage in the foreign trade deficit, and as a result in the current account deficit, was sustained in the first quarter. However, it should be noted that even as recession-dogged Turkey’s economy contracts, it is still carrying an annual current account deficit. Even with economic activity remaining somewhere near the bottom, taking into account upcoming external debt roll-overs, the FX-credit-fuelled country’s external borrowing requirement for 2019 remains close to $200bn.
Screw tightening. Jitters over the economic fundamentals are naturally not helped with the screw tightening on the Erdogan administration in both domestic and international politics. At home, Erdogan is still counting those darned untidy votes in Istanbul, while over in the US, where western powers have been celebrating the 70th anniversary of Nato, there is plenty of indignation that Ankara has somewhat spoilt the self-congratulatory atmosphere by pushing its refusal to back down from buying Russia’s S-400 missile defence hardware to the point where on April 3 US Vice President Mike Pence had to step in to declare: “Turkey must choose. Does it want to remain a critical partner in the most successful military alliance in history or does it want to risk the security of that partnership by making such reckless decisions that undermine our alliance?”
Next up is Donald Trump with his considered thoughts on the matter. Perhaps Erdogan’s best hope is that the Commander-in-Chief will venture that there’s nothing wrong with cutting a bargain deal with Uncle Vlad.
On April 8, Erdogan was indeed in Moscow to meet with Vladimir Putin with the Turkish finance minister, his son-in law Berat Albayrak. Albayrak delayed his PowerPoint presentation designed to offer markets encouragement that real, post-election economic reforms are on the way (if he can achieve a semblance of hope that may have to do) before he travelled to Washington on April 12 for a week of meetings, including encounters with IMF officials.
If past experience holds, Erdogan will pull new rabbits from his now 17-year-old hat (it is that long since he rose to the top of Turkish politics after finding prominence as mayor of his home town, Istanbul) that will calm down all the stakeholders in his government. Or maybe he will eliminate some of them and cut deals with new ones as he attempts to reassert an unbending grip on power. But that would mean making new enemies in close environs and raising the pressure level domestically.
Turkey again finds itself dicing with a potential cliff-edge. But it has been here so many times before in decades past. Not that the strongman shouldn’t be worried. His field of play is narrowing all the time.
8 TURKEY Country Report May 2019 www.intellinews.com