The year of our regression
The year 2026 is likely to go down in the annals of history as “the Year of Our Regression”, when the Iran War first halted and then began to reverse all progress made in healing the wounds of the Covid-19 pandemic. The war is unlikely to end before June or thereabouts, the politics author believes, after which the world will realize that it will take a year, if not more, to repair the badly broken supply chains.
Yet, the Iran War is not the leading essay of the politics author. The Istanbul DA’s office had the CHP mayor of the Bursa metropolitan area arrested, and he was duly sacked on Saturday. The Turkish press is full of articles asserting Erdogan’s final assault on CHP had started, but the real bloody battles will take place once the Iran War is wrapped up and Ankara assesses the fallout in her direction.
With the crackdown against CHP and the Iran war occupying most minds and print space, there is little coverage of the (Kurdish) Peace Process, which now also seems to be indexed to the Iran War. The politics author does expect some legislation and negotiations on a new constitution, but no positive results.
Having talked about the Iran war extensively in the recent quarterly/forecast report, the politics author just sums up his predictions, which range from very bad to truly atrocious.
Having laid out our macro thoughts and numbers in the aforementioned report, we just focus on a few key topics in this round. After relaying recent comments and statements from CBRT Governor Karahan and Finance and Treasury Minister Simsek, we review the March PMI and trade numbers, finishing with an update on reserves (through April 2) and a quick look at the financial data (through March 27).
In a nutshell, Messrs. Simsek and Karahan seem to be saying that the war damage is manageable so far, and that they could do more, if need be. We discuss why we think this stance is a bit too complacent perhaps, and recap what the CBRT should do at the April MPC meeting.
The manufacturing PMI and trade data are weak and concerning, respectively, with some traces of the war damage already detectable in both.
Finally, large outflows and reserve drops during the week through March 27 notwithstanding, some signs of stability appears to have emerged last week in terms of reserves, which, needless to say, we keep watching.
Now read on...
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