The week started off rather calm. There are, however, two important press statements worthy of our attention: March Unemployment Rate and January-May Budget Central Government Budget implementation results released by the Ministry of Finance.
Although the unemployment rate seems like it has been falling lately, I need to point a certain fact that I have frequently mentioned in my previous reports. Given the current economic model, it seems unlikely that the plateau unemployment rate will drop below 9.5%.
At least, the budget performance looks rather comforting. Budget revenue has no unfavourable deviations. Although the ever-increasing inflation gives the Government to collect more taxes, I think we should be thankful for what we got right now. Budget Deficit, on the other hand, is expected to stand at the anticipated levels at the end of the year, which of course will strongly depend on the post-election balance.
We have only a few days left to cast our votes. With regard to the recent rise in Exchange rates and Interest Rates, people mostly believe that things will better after the elections. According to polls results, a significant majority of people believe that the recent rise in exchange rates is mainly caused by foreign powers. Nevertheless, there are also expectations that the presidential candidates will advance to the second round of the elections.
“Every action must have an acceptable aim…”
However, there is a strong conviction that the second round will not surprise us as Erdoğan will be re-elected President of Turkey. On the other hand, it is not possible to state an exact opinion about the parliamentary arithmetic, because, polls yield very different results, sadly bringing negative impact on markets. AK Party had already stated that Turkey will have to go through one more election if parliamentary elections do not yield the result they hope. In such case, we should expect another election along with or before the local elections.
With the latest Fed and ECB decisions combined with recent economic developments is Turkey, especially the latest data on Turkish current account deficit and external debt stocks, the high likelihood of USD/TRY hitting 5.00 is still out there. Actually, Turkey would not have had to go through so many difficulties if investors had not questioned the competence and adequacy of the Central Bank in consequence of the CBRT’s long-delayed and drastic measures. When viewed from the vantage point of the people living outside the country, it can be seen that the economy administration is really broken.
Instead of launching economic packages right after the elections, I think the Government must show everyone that they have everything under control and will ensure proper monitoring of each and process.