bne IntelliNews – ISTANBUL BLOG: Just another day in Turkey’s desperate case



Just another day in Turkey’s economic basket.

The country’s statistical institute TUIK released the official report on consumer price inflation for November. The CPI stood at 21.31%, down from 19.89% in October, TUIK reported. This meant that Turkey’s inflation rate was now 6 pp above the central bank’s policy rate. Or did he do it? Moments before TUIK’s Dec.3 statement, the Inflation Research Group, or ENAG (no waste of time for these people, research is being led by well-respected Istanbul academics), calculated the CPI of Turkey’s November at 58.65%, compared to 50% in October and 45% in September.

Kemal Kilicdaroglu, leader of the main opposition, the Republican People’s Party (CHP), went to TUIK headquarters to ask for an explanation, but was refused entry.

Fitch Ratings, meanwhile, downgraded Turkey’s sovereign outlook to Negative. And the central bank has burned an additional $ 300 million from its reserves trying to resuscitate the stricken Turkish lira.

TUIK released its idea of ​​core inflation at 17.62%, down from 16.82% in October, and said producer price index (PPI) inflation was now 55%, up 9 pp m / m. We can’t stress it enough: Avoid planning, pricing, or deductions when it comes to TUIK data.

Kilicdaroglu: entry refused.
(Image: Cumhuriyet Halk Partisi, CC-BY-SA 3.0).

Such is the extent of the economic mismanagement of Turkish President Recep Tayyip Erdogan, there are open goals for the opposition everywhere you look. Kilicdaroglu, the country’s main opposition leader since 2010, comes across as an unhappy and ineffective man. Seeing him fail to get into TUIK seemed sort of predestined.

Last month someone told Kilicdaroglu that there was a state institution known as the central bank. He managed to enter the building. He had coffee with the governor and left. We have heard little about what happened, if not a lot.

The sight of Kilicdaroglu trying to subdue the cunning Erdogan can cause severe depression, if not worse. Thirty million Turks are hungry.

Is Kilicdaroglu supposed to put Erdogan on notice to leave the presidential palace? It’s hard to imagine. The images of him turned away from the back entrance look more appropriate.

And what about the cheeky Erdogan who drove his country to ruin and ruin? He says the opposition just waited for Turkey to collapse and now they are hoping the country will fall into their knees. Even a broken watch is right twice a day.

Muharrem Ince, the CHP’s Kilicdaroglu-backed CHP candidate for the presidency in 2018, recently remarked that he could now win an election against Erdogan as the Turkish lira (TRY) now stands at 14 per dollar against 4.5 Four years ago.

He is right. Even Ince could win a vote in a contest with Erdogan right now. It is a shame for Ince that Turkey’s currency crisis in August 2018, which set the pound squarely on the path of destruction that led to the collapse we have recently witnessed, came a few months after he collapsed. been pissed off in an election which meant Erdogan could remain seated in the palace.

Of course, what Ince, Kilicdaroglu, and all the other contenders for the throne should be concerned with right now is whether, under Erdogan’s regime, an election will actually take place (the law says that an election must take place). ‘by June 2023, but Erdogan has special skills when it comes to circumventing the laws).

Back with the auspicious Kilicdaroglu and we find that he has a penchant for writing letters in his spare time. Most recently, he sent letters to retail chefs asking them not to increase the prices of 10 basic groceries, including flour, oil, milk and pasta.

A most convincing and well-prepared policy. Kilicdaroglu could become the first politician in the world to solve the inflation problem by writing a few letters.

One problem that could disrupt his plan is that in wretched Turkey there are already quotas on certain items on supermarket shelves. Another difficulty is empty shelves. Such is the volatility of the USD / TRY exchange rate at present that some retailers would rather withhold goods than risk too low prices.

The sight of alarm devices linked to products in supermarkets and baby food locked in glass cabinets has become common in Turkey. Chained cooking oil cans are a new development.

On December 4, Kilicdaroglu was in Mersin. The purpose of his visit was to hold his first major meeting to call for urgent snap elections. Further meetings are planned.

These rallies are particularly appealing to middle-class CHP voters, who face drug and food shortages. They are also useful for Kilicdaroglu. He can get out of the office and get some fresh air. However, we are in December. The question arises as to how many more of these events can be organized before the cold winter weather comes down.

The CHP’s decision to hold the rally was also good news for strongman Erdogan. There should always be some hope that election day arrives, just to keep the troublesome serfs calm.

The CHP is running at top speed for elections.

The establishment and the middle class in Turkey, ranging from the political field to the media, are still unaware of the gravity of the situation in the country. Politicians have organized some events with fine words. The media broadcast the events. The tweet of the middle class.

Turkey experienced food and basic food shortages in the late 1970s. Too many people have died in clashes between right and left. The PKK, a Kurdish terrorist organization, was born on this fertile ground. Chaos paved the way for the 1980 military coup.

If Kilicdaroglu can be the main opposition leader in a country of 84 million citizens, Erdogan can be president, and TUIK can be the institute for statistics, why wouldn’t Fitch be the rating agency?

Fitch and his peers do serious work. They have avoided many global crises. The good thing about the financial industry is that you can lose everything you have except your reliability.

On December 2, during Istanbul night, Fitch landed by surprise, announcing that he had cut Turkey’s outlook at Stable Negative. The rating is BB-, three notches below the investment grade.

Explaining the move, Fitch told the administration that it intended to make further rate cuts. However, the firm did not explain why it couldn’t wait until the weekend market closed on December 3 to make its decision.

On the evening of December 3, Moody’s Investors Service announced that it had confirmed Turkey at B2 / Negative, five notches below the investment grade.

The central bank, meanwhile, confirmed on December 3 that it was back in the USD / TRY market to burn even more reserves.

BloombergHT cited anonymous sources as saying the delivery this time was around $ 300 million.

The central bank is also busy short-selling USD contracts on the Borsa Istanbul Derivatives Market (VIOP). However, these are contracts settled in Turkish Lira (no foreign currency payment at maturity) and the VIOP does not have a significant impact on the spot market.

Erdogan’s setup always makes some interesting choices. Currently, he is burning his reserves again as the media reports loudly that he does not have too many usable reserves to use in interventions, even in crude terms.

What is missing is a few more lire to buy currency and gold. Net lira loan flows amounted to TRY 104 billion in November, the highest figure since the record TRY 141 billion recorded in April 2020.

The growth in lira loans has not yet peaked, but this is only the start of a new phase of lending.

The next step in the pound’s fall is the $ 14 / $ break. The beleaguered currency’s last all-time low against the US dollar was recorded at 13.9745 on December 3.

Turkey’s five-year credit default swaps (CDS) rise above the 500 level again.

On the global market front, the USD (DXY) index rose to the 97 level at the end of the week.

Federal Reserve Chairman Jerome Powell was retained at the helm. He is good at making investments. Then again, it doesn’t take amazing skills to rule the Blackrock Reserves in the United States from Blackrock. Just listen to the advice from the Trump or Biden administration.

On December 15, Powell will announce the results of the Fed’s next open market committee meeting.

The current plan is to reduce the monthly net money printing volume by $ 15 million each month and bring it down to zero by July.

On Turkey’s foreign policy front, Erdogan said little importance this week. He appreciates a silence before a storm.

On December 16, Turkey’s central bank will release its next rate decision. The consensus suggests that the key rate will definitely be lowered again.

The cut could be 100bp, 200bp or 300bp. If the benchmark rate is lowered by 300bp, it will drop to 12%. A rate of 12% could allow Erdogan’s public banks to launch a mortgage campaign offering a monthly interest of 0.99%. Get the last chance at whether Erdogan is trying to kickstart one cycle of growth and slowdown too.


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