The meeting where the Central Bank, Minister of Economy and the President gathered together to discuss the latest economic developments caused excitement in the markets, like the one that has taken place in the Presidential Palace a week ago. Exchange rates and benchmark rates had declined during both meetings, but they had soon started to climb again as it has been decided not to take any preventing action.
Actually, the Government did take an action: It announced amendments to the Decree No. 32 on the Protection of the Value of Turkish Currency and Foreign Exchange Regime. Accordingly, in case of foreign exchange transactions in import, export or in any other monetary transactions, a penalty amounting to 40 percent will be imposed on the fair value of the assets of those taking money abroad. Well, I know, not an easy one to explain. I have been getting calls from so many people trying to figure out what this decision exactly means. I told them that, contrary to the previous ones, this decision is granting authority to the Economy Administration to monitor and investigate actions that raise questions in minds. However, I guess my explanation was not good enough to clear people’s unease.
According to some intel I got from Ankara, the reason why both the Minister of Economy and the CBRT Chair were summoned to the meeting at the AK Part quarters was because the meeting was held for an entirely different reason. If that’s true, I think we should just move on without making too much of that meeting.
Under the circumstances, I think I would not be wrong in saying that the USD/TRY would push 4,50 again, and the bond yield would start climbing towards 18%. I cannot see any other solution at this stage anyway, at least within the rules of free market economy.
Despite the fact that Turkey’s Industrial Output in March turned out to be lower than expected, we could see that it has still kept a strong stance on an annual basis, which goes to show that the first-quarter growth will quite probably turn out to be higher than expected, a rate amounting to 7% according to the experts.
As usual, I will continue to maintain a prudent optimist approach to this issue until I see whether or not the first quarter growth data would bring ‘value-added’ to Turkey.