Page 5 - TURKRptJun19

1.0 Executive summary
Istanbul revote will be held on June 23.
Whatever result the Istanbul revote delivers, there have to be expectations that a snap general election can be expected not too far ahead.
Imamoglu, this is a politician who seems determined to win again. “Election—like the one in March & the one in 2018—sets the stage for
another credit boom to boost growth at the cost of the BoP & Lira”. Turkey’s public lenders are to provide a Turkish lira (TRY) 30bn ($4.9bn)
financing package.
Turkish government officials and local banks are working on an Energy Venture Capital Fund as a method of refinancing problem loans in the energy sector worth up to $2bn.
A bailout of Turkey’s construction sector is also under way.
Turkey needs to stick to free market rules, Isbank chief executive Adnan Bali said on May 22, warning that imposing controls would harm economic welfare.
Brussels raises “deeper concerns over functioning” of Turkey’s market economy. A range of policy actions the Turkish authorities took only negatively affected the functioning of the markets by interfering with price formation and introducing constraints on the free use of foreign exchange.
Talk of a Turkey default grows.
The government is overcoming the lack of appetite to provide for its domestic borrowing needs via “encouraging” local lenders and pension funds to buy government bonds and it is overcoming its foreign borrowing shortage via “encouraging” local lenders to park their offshore FX deposits at the central bank to comply with rising reserve requirement ratios.
Turkey’s 5-year credit default swaps (CDS) hit 520 bp but the fate and control of the lira are supposedly subject to finance minister Albayrak’s “iron fist”.
BIST-100 entered bear market. According to official demands, private pension funds will increase their investments in the government’s lira bonds and they will buy equities at Borsa Istanbul. So, the USD-denominated benchmark BIST-100’s problematic testing of the 2009 dips will be “solved”.
Turkey’s net FX reserves excluding swaps hit minus. A quite amazing Ponzi scheme keeps expanding here as locals turn their lira deposits into FX. Public lenders are currently selling local banks’ required reserves held at the central bank, along with amounts raised through FX swaps—put more frankly, FX deposits at local lenders—to curb the renewed depreciation of the Turkish lira.
Turkey technically exits recession but analysts fear double-dip's ahead.
Reuters shows signs of waking up to how, through the official lens, Turkey’s inflation rate is puzzlingly slowing in an import-dependent environment where the TRY has lost around 13% of its value against the USD so far this year.
Turkey’s BB/Negative rating could be downgraded if “existing weaknesses
5 TURKEY Country Report June 2019 www.intellinews.com