Page 50 - BNE_magazine_05_2019

50 Opinion
bne May 2019
rates drive up inflation and, yes, as president he should be a dominant voice in steering monetary policy – but a Washington audience of Wall Street-wise investors just ain’t gonna run with that. It’s no wonder that by all accounts Turkish central bank governor Murat Cetinkaya, who appeared at the hour-long presentation alongside Albayrak, said little. Who can blame him?
Still, analysts say Albayrak and his strongman father-in-law could pluck victory from the jaws of economic defeat if they quickly get real, though the window of opportunity for such a turn on a sixpence will soon be shut.
Palpable uncertainty
There’s still palpable uncertainty as to where things go
from here. For instance, the median of a Reuters poll of 43 economists on April 12 gave an estimate that Turkish GDP will contract 0.3% y/y in 2019, with the range of forecasts ranging
“The dilemma facing Turkey is
a trade-off between growth & Lira stability”
from growth of 2.3% to a contraction of 5.0%. Turkey’s GDP is expected to contract 3.4% and 1.2% in the first two quarters of 2019, respectively, before returning to growth of about 2.1% in Q3, according to the poll’s median.
The Turkish statistical institute TUIK will announce the official Q1 GDP data on May 31.
The Reuters poll participants’ median inflation forecast was for 17.5% at end-Q2 and 15.5% at end-2019. Expectations for the current account deficit in 2019 stood at 2.4% of GDP.
When asked whether Turkey will seek funding from the
IMF or another outside institution, six respondents said No. Also, Turkey was not expected to hold early presidential and parliamentary elections ahead of the scheduled date of 2023, according to five respondents.
One analyst holding out for a soft landing scenario is Muammer Komurcuoglu of Is Investment. He said: “We expect the economy to return to the positive growth zone in the second half of the year. Yet, this recovery is fragile and depends on political and geopolitical developments.”
Of the analysts with no real faith in the Turkish lira, one is Guillaume Tresca of Credit Agricole who told Reuters: “It’s not a real market...you don’t take the risk on TRY, or if you do it is just for one, two or maybe three days.”
And just who was it that was hosting Mr Albayrak?
Finally, let’s take one more look at that hotel presentation and ask ourselves, just who was it who was hosting Mr Albayrak
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at this guest-only event. If you saw any sign of squirming from Albayrak that may have been because the answer is JPMorgan Chase & Co. That’s right, JPMorgan, the very investment bank that, in the week before Turkey’s March 31 local polls, became a target of Erdogan for issuing a March 22 research note advising investors to short the lira based on its observation of unsustainable FX reserves.
On March 23, Turkish banking watchdog BDDK initiated investigations into JPMorgan as well as other unspecified banks for allegedly exploiting and aggravating the biggest plunge in the Turkish lira (TRY) seen since last summer’s currency crash. The BDDK accused the two JPMorgan analysts behind the note of putting out “misguiding and manipulative” advice.
Subsequently, on March 24, Erdogan warned bankers during an election rally that there would be “a heavy price” to pay after the elections were over.
“If you are soaking up foreign currencies from the market and engaging in provocative actions, there will be a heavy price for that... Now, the banking regulator took some steps, but you should know that, we will make you pay a heavy price for that after the elections and all the work is being conducted by the Treasury and Finance Ministry,” Erdogan said.
“I am calling on those who are engaging in such activities ahead of the elections. We know the identities of all of you. We know what you are doing... You would not be able to exploit this nation. You would not be able to cheat this nation... We will protect our money. Our money is the Turkish lira. We will protect it. We will not rise to the bait. And we will make them pay the price,” he added.
On March 27, after the Erdogan administration attempted
to dry up almost all offshore lira liquidity on the London swap market to frustrate the shorts, pro-Erdogan
daily Hurriyet quoted an unnamed banker as saying that some lenders that attempted to short the lira the previous week – including Citibank, JPMorgan and Deutsche Bank – could not have closed their short positions and might be temporarily or even permanently banned from the payments system.
Yet less than a month later, there was Albayrak up on stage in Washington at an event hosted by JPMorgan, underlining once more to those expecting long-term economic reforms from the Turkish government just how long its attention span actually is.
“If you are soaking up foreign currencies from the market and engaging in provocative actions, there will be a heavy price for that”