Expectation around Turkey
Not much good news from the latest CBRT survey of expectations which continue to deteriorate.p more or less across the board in terms of the economic outlook. And the year end lira forecast looks overly optimistic to me.
https://www.tcmb.gov.tr/wps/wcm/connect/7d0b1e66-2858-4b82-80fe-78592a41945f/SMP_Report.pdf?MOD=AJPERES&CACHEID=ROOTWORKSPACE-7d0b1e66-2858-4b82-80fe-78592a41945f-oagSAXh
Lots of focus now on Erdogan calling in favours from “friends”. Putin, MBS - with local talk now of a $20bn facility likely to be provided by Saudi to support Turkey.
This all seems part of Erdogan’s “win the election at any cost” scenario, and taking cash from anyone willing to offer it, friends and former foes alike, to stabilise the lira and try and use that as an anchor to curb inflation.
It is pretty incredible really to think that Erdogan is taking cash now from Russia, and Putin, the butcher of Syria and Ukraine, and also from MBS in Saudi - no moniklers required there. What a turnaround given that Erdogan had previously been trying to push back against Putin in Syria, and was also daggers drawn with MBS up until a few months back. Needs must I guess, and it just shows how desperate Erdogan is to win this election.
My question in all this is what happens if Erdogan actually wins the election?
Most people are just taking short term views, which is either it’s a muddle thru to the election, and maybe the opposition wins and then there is a 180 degree turn in policy with the market rallying and Turkey becoming the market darling again. But Erdogan’s whole agenda at the moment is trying to scrape cash from anywhere to win this election, with little thought to the skeletons of bad policy being exhumed from the past. If he wins, the cupboard will be bursting open with skeletons, and it will need a massive about turn in terms of policy to avoid a huge likely systemic crisis in Turkey. This could obviously still happen before elections.
I guess remembering back to Erdogan over the past 20 years, it’s all about the now, and he always assumes that something will break to his advantage in the future. Do everything to stay in power now, and let’s worry about next year, next year. That’s terrible for business, longer term growth, etc, but it has kept him in power for 20 years. Maybe all this will catch up with him in 2023. I seem to think the catch up will be either he loses the election, or the mother of all systemic crises will happen in Turkey post election, assuming an Erdogan win. Bottom line, current policy settings are just not sustainable - the question for us all has been the time frame of sustainability, is it 1 month or 1 year? But it is certainly not 2-3 years, that’s for sure.