Turkey Flotilla Flotsam Formation
Turkish shares continued as emerging Europe’s worst as the Finance Minister characterized the 10 percent of GDP current account deficit with the lira’s 20 percent slump as “yesterday’s problem,” and geopolitical anxiety spread with ruptured Israeli ties over past treatment of a seized Palestinian aid ship. Erratic central bank policy has been rattling investors as an innovative mix strives to slow credit growth and discourage high-yield debt inflows, while preserving domestic demand and balance of payments coverage with the surrounding Eurozone debacle. Consumer loan growth has been just over 1 percent monthly pointing to success, but Q2 GDP was up again at a torrid 10 percent pace and repatriation of Turkish capital from abroad has supplemented decreased foreign allocation. A dollar intervention fund had been suspended but was recently reactivated not to curb appreciation but to support levels officials argue are 10 percent undervalued. President Erdogan after comfortable re-election has injected his administration heartily into Mideast tumult with criticism of Syria’s repression and praise for Libya’s Qaddafi ouster in addition to the dispute with Tel Aviv, which has hurt the exchange there alongside a domestic protest movement over housing costs and international controversy over a UN bid for Palestinian Authority statehood. The Israeli economy has softened to a 3 percent growth clip and the shekel has slid as a round of rate cuts is previewed. The heavy export reliance on high-tech and defense goods could suffer under global cutbacks, and at home the Netanyahu team is under pressure to break-up family conglomerates which dominate business and finance.
Relations have also frayed with Arab neighbors in transition, including Egypt now under military rule, where Sinai border attacks have been mounted, and Jordan and Lebanon with their own fragile governments. King Abdullah has introduced constitutional changes to give parliament more power, but has turned to $10 billion in Gulf aid to plug a runaway budget gap. Lebanon’s triple-digit sovereign debt load depends on bank placement, and deposits have flat-lined with GDP growth at only 1.5 percent and the Syrian spillover. The Hezbollah faction in the coalition has refused to hand over accused killers of former Prime Minister Hariri named in a years-long international investigation. Iran’s role in the area hangs over the interplay with the US army also due to exit Iraq by year-end where a new hydrocarbons law was just endorsed after 5 years of negotiations. Production has reached almost 2.5 million barrels/day and additional licenses have been awarded to multinational drillers looking to find eventual transition fortune.
