Turkey Industrial Production & Retail Sales (Feb.)

Turkey’s activity figures for February suggest that the economy lost momentum in the first quarter of this year and the recent surge in COVID-19 cases, combined with the tightening of financial conditions, means that the recovery will continue to falter over the coming months.
Jason Tuvey Senior Emerging Markets Economist
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Emerging Europe Economics Weekly

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The Russian ruble appreciated to its strongest level against the dollar since last July this week and the balance of forces now increasingly favours further gains, but a lot depends on geopolitics and all eyes will be on the outcome of the Biden-Putin summit next week. Meanwhile, the difference in opinions between Hungary’s central bank and the government about the outlook for policy further suggests that the central bank is taking the inflation fight more seriously and that the tightening cycle will start this month. Finally, we revised up our forecasts for the koruna, zloty and forint this week.

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Emerging Europe Data Response

Turkey Industrial Production & Retail Sales (Apr.)

The m/m falls in Turkish industrial production and retail sales in April are likely to be followed by further weakness in May (when a three-week lockdown was in place). This supports our view that the economy will probably contract in q/q terms over Q2 as a whole. We suspect that the central bank will leave interest rates unchanged when it meets next week, but the softer economic activity figures will add to demands for rate cuts, which seem likely to come in July.

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Middle East Economics Update

Iran: nuclear deal, elections and the economy

Negotiators appear to be closing in on an agreement to revive Iran’s nuclear deal which, if revitalised, would provide a substantial lift to Iran’s economy – it could plausibly expand by 8-10% per year in 2021-23. Higher Iranian oil output would act as a drag on global oil prices and could prompt governments in the Gulf countries to keep fiscal policy tight, weighing on their recoveries.

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Erdogan piles on the pressure, Israel’s surprise coalition

Talk this week of rate cuts in Turkey has led to further falls in the lira and, ironically, means that the central bank will stand pat at this month's MPC meeting. In Israel, the coalition proposal formed to topple incumbent PM Benjamin Netanyahu is so fractured we don't think it will lead to major changes in economic policy. Finally, the announcement by Russia's government to de-dollarise its National Wealth Fund assets won't have an economic impact, but it is a clear move ahead of the Biden-Putin summit this month that Russia sees its future as isolated from the West.

4 June 2021

Emerging Europe Data Response

Turkey Consumer Prices (May)

The latest falls in the lira mean that, despite the fall in Turkey’s headline inflation rate to 16.6% y/y last month, the central bank (CBRT)will probably leave interest rates unchanged at this month’s MPC meeting. But the CBRT is likely to fulfil the president’s desire for monetary loosening by August.

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