The scandal drags, economy muddles on
As you read this report, the Fund Scandal will have mesmerized the entire nation for two months, which is a decade-long record of single-minded preoccupation. The national focus on the Scandal is delaying President Erdogan’s pre-election plans, while he and AKP begins dropping in some polls.
Apropos the Fund Scandal, the resignation of BRSA chair Sahap Kavcioglu is the most irrefutable proof of AKP and top civil servants’ involvement. While “fund victims” are being drip-fed compensation, attention turns to over 400 individuals who sold their certificates with profit in the last fortnight leading to the collapse of the scheme, a list which still remains confidential. Erdogan will be forced to sacrifice more members and cronies to grant the nation a closure, the political analyst thinks.
On Saturday, the main opposition party, YENİ Party, reelected Ozgur Ozel as chairman, as well as issued a manifesto explaining how it intends to govern Turkey. It is a very equalitarian and progressive agenda, vowing adherence to Turkey’s traditional Western vocation.
In foreign affairs, Erdogan and Aliyev made up, while the dispute with Egypt has been downplayed by both nations. Turkey is now facing Greece in yet another disagreement over subterranean pipelines and electricity transmission cables (yawn).
Production indices for the third quarter suggest weak sequential headline GDP growth, if any, and a composition similar to the previous quarter, thanks to a drop in import volumes.
The CBRT Participant Survey showed a further modest drift away from the CBRT’s inflation path, a path which was laid out in the final Inflation Report of the year last week. Yet, participants expect a 100 bps cut of the policy rate on December 10, and the policy rate to drop to 28% by end-2027. We find the latter too optimistic, as we’ve often been pointing out.
The current account posted a hefty surplus in September, largely explained by seasonal patterns, but also a shrinking gold deficit, while the financing side was pretty awful, reflecting the adverse impact of the Fund Scandal.
Reserves remain rather volatile, partly driven by the vagaries of the gold price, but the drain appears to have reversed, broadly speaking.
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