The fact that Turkey was not included in the US economic sanctions list against Iran stood out as an important factor in helping the markets gather strength. I can easily say that investors seem pretty relieved to see a leading indicator of the fact that the US is ready to break the ice with Turkey. The US offering reward for information on senior PKK terrorist did not go unnoticed either. However, I can imagine that Turkish Government is perfectly aware that this is just a strategic move to legitimize the presence of PYD and YPG.
Maybe we can expect the US to make more decisions in favour of Turkey from now on regarding Halkbank and Iran sanctions busting trial. As far as we know, Halkbank talks with the US President are on positive path.
Accordingly, all these positive developments stopped us from feeling down because of the higher than anticipated inflation. As I mentioned yesterday, skyrocketed Furniture prices on year-over-year basis as well as Clothing and Footwear on month-over-month basis are closely associated with industries (producing intermediate and final goods) that operate under intensified protectionist measures. The fact that these industries are demanding Turkish government levy additional export taxes and tariff barriers brings negative impacts directly on inflation.
As a matter of fact, although there is a significant increase in footwear prices, domestic companies are disappearing one by one. Protectionist walls did make foreign brands raise prices, Turkish companies, on the other hand, failed to compete in international markets. Protectionist practices, which came into force 4 years ago from now, have brought some severe side effects including high inflation and high cost of living, let alone the fact that they have neither effective nor useful in any way.
“Ultimate expectation of everyone…”
Turkish business people urgently need an economic action plan since they consider markets ease-thanks to recent diplomatic developments-only temporary. Emphasizing that the anticipated economic stability plan should be “convincing”, they want Government to act more diligently and properly this time in terms of implementing the plan.
When I look back over the past decades, I see a number of economic stability plans that have been launched with the IMF but all failed to achieve the success they were intended to. However, I must admit that the 2001 plan was quite a success. Turkey needs large amounts of funds which can only be provided by a leading institution. That’s why I’m guessing that we will hear a lot more about the IMF over the upcoming weeks. Let’s just hope I’m wrong about this.
Before I conclude, I would like to mention another positive development: a sharp decline in Benchmark Rate due to massive bond-buying. According to some, Turkey breaking the ice with the US would be enough to help economic improvement despite high inflation rates. In situations like this, I usually prefer to be cautiously optimistic.