20180115-法国巴黎银行-Morning_Meeting_Notes_9页_494kb

EM STRATEGY | TURKEY DESKNOTE Summary

Core Content

This document is a morning meeting note from Turk Ekonomi Bank A.S. (TEB), dated 15 January 2018, authored by H. Erkin Isik, CFA, focusing on the CEEMEA FX&IR Strategy. It provides insights into the Central Bank of the Republic of Turkey (CBRT) monetary policy decisions, inflation expectations, external imbalances, and market data for Turkey.

Main Views

Monetary Policy Expectations

• CBRT Policy Stance: The CBRT is expected to leave all corridor rates and the average repo funding rate unchanged during the upcoming MPC meeting, in line with market consensus.
• Reasoning: The recent decline in headline inflation to 11.9% y/y in December, due to easing selloff pressure and a base effect, is likely to encourage the CBRT to maintain its current policy stance.
• Inflation Target: The CBRT's inflation target is 5% with a 2% uncertainty band. The strategy suggests that the CBRT may consider easing monetary policy once the expected inflation rate declines to at least 7%.

Inflation Expectations

• Survey of Expectations: Expected inflation after 12 and 24 months peaked at 9.30% and 8.47% in December, respectively.
• Recent Trends: In the January survey, expected inflation after 12 months fell by 6bp to 9.24%, while the 24-month expectation dropped by 24bp to 8.23%.
• Price Trends: Fresh fruit and vegetable prices from Antalya's wholesale market have declined, suggesting a downward trend in food inflation, which may lead to headline inflation approaching 10.5% y/y in January.

Key Information

External Imbalances

• Current Account Deficit: The current account deficit in November was USD 4.2bn, exceeding market consensus and the forecast of USD 3.9bn.
• Annualized CA Deficit to GDP Ratio: Increased by 0.2pp m/m to 5.2%, and is expected to end the year at 5.6%, up from 3.8% in 2016.
• Gold Imports: A significant portion of the increase (1.3pp) is attributed to higher gold imports.
• Excluding Gold: The deficit excluding gold is expected to end the year at 4.5% of GDP, the highest since September 2015.
• Main Cause: Strong GDP growth at around 7% in 2017 is the primary reason for the worsening external imbalances.

Financing of the Current Account Deficit

• Dependence on Portfolio Flows: Financing continues to rely heavily on portfolio inflows.
• November Outflow: USD 1.3bn outflow in November indicates a reliance on FX reserve utilization.
• Annualized Inflows: USD 22bn from portfolio inflows and USD 3bn from short-term capital flows.
• FDI Inflows: Annualized FDI inflows remained stable at USD 9bn.
• Long-Term Outflow: There was a USD 1bn long-term capital outflow.
• Net Errors & Omissions: USD 6bn net errors & omissions over the last 12 months, possibly due to unregistered capital inflows.
• FX Reserve Utilization: USD 6bn FX reserve utilization in the last 12 months to November.

Currency Vulnerability

• Global Liquidity Risk: The currency is vulnerable to changes in global liquidity conditions due to its heavy reliance on short-term flows.
• Pass-Through to Prices: The pass-through from currency to prices is high at around 17%, posing a risk to inflation outlook.

Market Data

Foreign Exchange and Swap Market

Note: 50% USDTRY + 50% EURTRY

CBRT Average Repo Funding Rate

Government Bonds Yield Curve

USDTRY ATM Vol Curve

Contacts

Legal Notice

• This document is non-independent research and is intended for marketing purposes.
• It does not constitute investment research and is not subject to any prohibition on dealing ahead of dissemination.
• BNP Paribas may have financial interests in the securities or entities mentioned and may engage in transactions inconsistent with the views expressed.
• The document may include simulated performance data and is not a prospectus or public offering.
• It is for information purposes only and may be subject to change or discontinuation.
• Recipients are advised to consult independent advisors and to understand the risks involved before making any investment decisions.