Page 10 - TURKRptFeb21

As it happens, the global finance industry does not actually believe in any Turkish commitment to long-term tightening despite the calls for lira appreciation.
“We’ve seen this so many times before. No one believes this is a long-lasting story now. There’s no one left to have any faith that Erdogan has learned. We’re all assuming this goes on for six months and Erdogan goes back to calling for interest rate cuts,” Charles Robertson, chief economist at Renaissance Capital, told the Wall Street Journal on January 7.
Some investors may be buying into a brief upswing for Turkey while capital pours into emerging markets on optimism that an end to the coronavirus (COVID-19) pandemic is in sight, according to Robertson.
The big question is thus how long Erdogan’s current ‘hot money party’ will last for. Robertson’s “six months”, starting from November, point to it concluding in May. It is at that point that Turkey’s official inflation index is expected to start trending downwards.
But can Erdogan hold on until May? While he struggles with sore temptation compounded with a rippling desperation, it would seem that global finance could even ignore a nuclear explosion in downtown Istanbul. Certainly by May, it will not be hard to list some reasons for a sharp exit by foreign players.
Moved to write about hunger. On January 15, even Reuters had been moved to write about hunger in Turkey.
Reuters dutifully trots out the government line that Turkey’s annual inflation rate stands at below 14.6%, while the unemployment rate is moderating and the Turks have the fastest growing economy in the world.
Not next up is a report from Reuters explaining how the so-called fastest growing economy in the world is creating such hunger. Pointing to the sharp jump in Turkey’s labour productivity that the official data implies may help.
Given that the Turks are all too aware of their booming inflation and the simply dreadful economic conditions in their country, even the finance industry cannot believe in the ‘de-goldollarisation’ story but they have to talk about it.
As of January 22, the share of FX deposits in total deposits at Turkish banking system stood at 55%.
From November 6 to January 22, $4.93bn flowed into Turkish markets. Note that the biggest weekly inflow, at $1.9bn, was seen in the week ending December 18, but that $1.59bn went into repo papers; it underlines how the inflows have a short-term focus.
The BIST-100 benchmark index of Borsa Istanbul on December 30 passed 200 on a USD basis for the first time since June 2018.
10 TURKEY Country Report February 2021 www.intellinews.com