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Turkey Country Report - March, 2017

Turkey Country Report - March, 2017
Turkey remains in a difficult place both politically and economically that is weighing on growth. Analysts expect Turkey to be dogged by this uncertainty for at least two years depressing the economic outlook until at least 2019.

The World Bank in February cut its 2017 GDP growth forecast for Turkey to 2.7%, while the IMF projected below potential expansion in 2017. The Fund expects Turkey’s economy to expand at 2.9% this year and 3.3% in 2018 due to a combination of a number of negative political and economic factors.

In another blow, Moody’s Investors Service has cut Turkey’s rating outlook to negative from stable. And in January Fitch Ratings followed suit, stripping the country of its last remaining investment grade, while Standard & Poor's lowered its outlook for the country.

But it’s not all bleak. The latest official data suggest that Turkish consumers are by now largely shrugging off the political and economic risks. The consumer sentiment surprisingly improved in March.

One striking finding of the latest sentiment survey was that, with the potentially epoch-making April 16 referendum on switching to an executive presidency just around the corner, consumers had grown more optimistic about the economic outlook, the jobs market and the inflation curve.

The referendum campaign is a tense affair. The Yes and No camps are exchanging strong words, deepening the polarisation of society. The president and government’s main argument for winning over the electorate is that the proposed presidential system will bring more economic and political stability to address troubled times. The March sentiment survey suggests that consumers may be buying this standpoint. It might also be indicating that they think the government will win the popular vote.

It is difficult to otherwise explain why it is that consumers have become more confident about the economy when the country is facing a whole heap of problems all at once. Some of the economic and political troubles have been inherited from 2016  - such as the interminable Syrian conflict and the spillover from the botched putsch, including the massive purge of citizens - and some of them are new. The heated diplomatic spat with several European Union countries that absorb so many of Turkey’s exports, with Turkish President Recep Tayyip Erdogan going so far as to throw accusations of “Nazi practices” and “Nazi remnants” at Germany and the Netherlands, is a case in point.

In the face of these challenges, confidence is at least trickling back, perhaps substantially due to post-coup attempt measures the government has undertaken to boost consumption. In February, for instance, it removed the special consumption tax on white goods for a three-month period running until April 30, while also cutting VAT on furniture.

Clearly, there is nothing domestic consumers can do about the lack of confidence in security that is keeping so many foreign tourists away from Turkey. On March 24, Erdogan declared that after the referendum Ankara would look to maintain EU economic relations while reviewing political ties. Some Europeans might be reluctant to forgive and forget how, in their eyes, he has so crudely overstepped the mark. Pointing to this concern, on March 18 German Foreign Minister Sigmar Gabriel told Der Spiegel that Turkey is undoubtedly further away than ever before from becoming an EU member.

The hapless Turkish consumer could end up praying that the leverage Erdogan has over Europe where migrants from the Middle East are concerned - he has in the past threatened to “open the gates” should Brussels not comply with his demands - proves the ace up his sleeve.


1.0 Executive summary
2.0 Politics
2.1 Turkish justice minister: US arrest of Halbank deputy CEO “completely political”
2.2 Tillerson gives little away after tough meetings with Turkey’s Erdogan and PM
2.3 Turkey’s spy agency hands over information on Gulen followers in Germany
2.4 Turkish expats start voting in referendum on constitutional changes
2.5 Turkish Deputy PM threatens economic sanctions on Netherlands
2.6 Politics - misc
2.7 Polls & Sociology
3.0 Macro Economy
3.1 Macroeconomic overview
3.2 Macro outlook
4.0 Real Economy
4.1 Industrial production
4.2  Inflation
4.2.1 CPI dynamics
4.2.1 PPI dynamics
4.3 Production dynamics & PMI
4.4 Fixed investment
4.5 Labour and income
4.5.1 Labour market, unemployment dynamics
4.5.2 Retail sector dynamics
4.5.3 bne despair index
5.0 External Sector & Trade
5.1 External sector overview
5.2 Balance of payments, current account
5.2.1 Import/export dynamics
5.2.2 Current account dynamics
5.2.3 Gross international reserves
5.3 FDI
6.0 Public Sector
6.1 Budget
6.1.1 budget dynamics - specific issues
6.1.2 budget dynamics - tax issues
6.1.3 budget dynamics - privatization, govt funding
6.2 Debt
6.2.1 Private debt dynamics
7.0 FX
8.0 Financial & capital markets
8.1 Bank sector overview
8.1.1 Earnings
8.1.2 Loans
8.1.3 NPLs
8.1.4 Banks specific issues
8.1.5 Banks news
8.2 Central Bank policy rate
8.3 Stock market
8.3.1  ECM news
8.4 International ratings
8.4.1 International ratings - specific details of rating actions corp/regional etc
8.5 Fixed income
8.5.1 Fixed income - bond news
9.0 Industry & Sectors
9.1 Sector news
9.1.1 Oil & gas sector news
9.1.2 Automotive sector news
9.1.3 Transport sector news
9.1.4 Construction & Real estate sector news
9.1.5 Agriculture sector news
9.1.6 Tourism sector news
9.1.7 Utilities sector news
9.1.8 Metallurgy and mining sector news
9.2 Corporate news
9.2.1 Oil & gas corporate news
9.2.2 Transport corporate news
9.2.3 Retail corporate news
9.2.4 Utilities corporate news
9.2.5 TMT corporate news
9.2.6 Other sector corporate news

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