From Operation Peace Spring to Brexit

As usual, I’ve been out of town to celebrate the Republic Day. In this special location where I go to celebrate the Republic Day each year, it’s like as both Turkish and international guests get to witness the proclamation of Turkish republic.

As most of the foreign guests here like to keep themselves up-to-date with recent Turkish affairs, we can get to have some satisfactory and thought-provoking conversations. Some of the guests here tried to tease me, claiming “how lucky” I am. I instantly knew they were talking about the fact that post-Operation Peace Spring events led to rather positive results for Turkey.

So, I reminded them a quote by a pioneer American filmmaker: “The harder I work, the luckier I get….”

Born in Poland in 1879, Samuel Goldwyn was one of Hollywood’s most prominent producers. Goldwyn died at his home in Los Angeles in 1974. He personally witnessed the darkest times in America. He believed that if people work harder, they would have more luck. Well I must say that I’m in violent agreement with Goldwyn.

It gets easier to get solid results in situations where both the government and the people can maintain a strong stance together. So, either from government or opposition, political leaders must understand the fact that the things you say will be embraced and protected as long as they are based on national interests, as opposed to words that promote and fuel extravagancy, unproductiveness, conflict and disintegration.

Indeed, the Operation Peace Spring has not only helped Turkey’s diplomatic affairs but also ensured certain calmness in Monetary and Capital Markets. Benchmark rate, for instance, fell back to its previous level around February 2018 while we saw a significant decline in CDS premiums. All these results are obviously much correlated with important steps and risks that companies have taken.

BIST went back to its previous 100.000 index level in 2017. It’s such beautiful news especially in terms of values of Turkish companies that have been dealing with a series of bad luck for a while now. Visible improvement in confidence indexes did not go unnoticed either. All of this gives us hope for finishing 2019 with a GDP growth rate higher than 0%.

But, one of the biggest problems here is the recent decline in Turkish exports performance because of the global conjuncture. The fact that the exporting companies reduce their prices due to harsh competition and get discouraged by tariff barriers in some markets causes great concerns about the future of current account deficit, not to mention the growing liquidity squeeze in public sector. It would be inevitable for Turkey to run a primary deficit amount above 100 billion TRY if it weren’t for the CBRT’s reserve funds and one-time revenues.

If you ask me, Turkey doesn’t seem to have moved away from its inflation and unemployment targets. However, we must be extra careful against the disruptive effects of current account deficit and budget deficit, especially in 2020.

“Latest news on Brexit…”

EU Countries decided to take a new step about Brexit when British government and opposition agreed on a snap election: UK is now granted extension until the end of January, which made the first duty of the new government even more obvious.

If Conservatives loses the election, UK may hold another referendum. A majority of UK citizens are not happy about their Brexit vote, complaining, “We said ‘yes’ to Brexit but then we realized that all of those promises were nothing but a hoax”.

This being the case, I really don’t know if we will ever be able to come up with a solution to get rid of this Brexit that will do bring no good to anyone. But, I do know that UK should at least get rid of Boris Johnson.

PS: Only a few hours left until the FED press conference. I expect a rate cut by 25 bps.