Turkey going without the IMF

Published October 14th, 2009 - 09:50 GMT

Emerging EMEA Economic Weekly

David Hauner, head of emerging EMEA economics   
In focus

Turkey: going without the IMF (p.2) We had been arguing, in line with the consensus, that "no-IMF funding" would keep borrowing needs high, crowd out the private sector, and put pressure on market rates in 2010. Looking into the banking sector in details, we now conclude that the borrowing needs can be satisfied without crowding out the private sector thanks to cash rich banks.

 

MENA: strong top-down, improving bottom-up (p.8) The improvement in the global backdrop, higher oil prices and recovering credit market have all strengthened the case for GCC recovery. As the seasonality has turned favourable and the region specific concerns have started to ease, the positive global backdrop is likely to become the dominant theme for the region. We still favour UAE and Saudi, while we believe Egypt may face some headwinds.

 

The week ahead

Central Europe: focus next week will be on Hungary’s industrial output and budget data, and on the Czech Republic’s CPI inflation. In Hungary, industrial output contraction likely remained close to that a month ago, while the budget report should confirm that the 2009 fiscal deficit target of 3.9%/GDP is achievable. In the Czech Republic, CPI inflation probably slipped below zero in September and is running some 25-50bps below the CNB forecasts. Combined with the EURCZK downtrend this shifts the balance of risks for our central case scenario (that monetary easing cycle is over) towards that of one final 25bps rate cut this year. Inflation and EURCZK dynamics will be critical to watch in the near-term.

 

Turkey: the main release of next week is the August industrial production (BofAML: -5.8% yoy). While the improvement in the second derivative continues, the pace of recovery in industrial production has been slower than expected. Still, we expect Turkey to post a strong Q4 2009 GDP growth.

 

Russia & CIS: focus on September CPI inflation in Russia and Ukraine; we expect the headline CPI rates to decline to 10.8%yoy and 15.0%, respectively.

 

South Africa: the main macro release next week is August manufacturing production. We expect further improvement in the headline (BofAML: -11%yoy).

 

Major forecast changes

Hungary: we revised our 2009 current account deficit forecast to -1.8%/GDP (from -3.4%) given better than expected Q2 data. Poland: we revised our 2009 current account balance forecast to -0.6%/GDP (from +0.5%), given downward revisions to historical data that showed slower improvement in underlying trend.


 


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