Emerging Markets

Renewed defeat in Istanbul increases the pressure on Erdogan

The new mayor of Istanbul is Ekrem Imamoglu – and this time for real. The candidate he ran against, Binali Yildirim of the AKP, has already conceded defeat, and President Erdogan has congratulated Imamoglu on his success. For the AKP, and above all for the head of state, the loss of the economic powerhouse to the opposition is a problem. No less a person than Erdogan himself is rumoured to have said: “Whoever wins Istanbul, wins Turkey.” Imamoglu is undoubtedly still well away from achieving that, but having lost the largest city in the country, the AKP has also lost a major source of money with which to supply favourites and others upon which favour is to be bestowed with lucrative jobs and contracts. In addition to this, the AKP now no longer holds the reins in any of the three largest cities in the country. Even if many pundits…

Turkish Lira in difficult waters

This year, the Turkish Lira has to date made no headway. On the contrary, the currency has lost a good 10% against the Euro since the beginning of the year. The list of factors dragging it down is anything but short. Global trends play a role, admittedly, but this should not detract from the fact that the major challenges to the Lira are to be found on the home front and, as was the case last summer, the difficulties are indeed home-grown. Against the backdrop of the annulled results of the local elections in Istanbul, investors have become ever more concerned that Turkey under Erdogan is distancing itself (still) further from basic democratic principles. It is precisely these worries that are damaging the reputation of the Turkish central bank, on top of which diplomatic relations with the US are tense. Washington is threatening that the NATO partner will face consequences…

South Africa remains loyal to the ANC

South Africa has gone to the polls. Although only a quarter of the votes have been counted this morning, and the official final result is not expected until next Saturday, it is already becoming apparent that the ruling African National Congress (ANC) and its President Ramaphosa have gained a clear absolute majority in the National Assembly, after pooling around 55% of the votes so far. Compared with the parliamentary elections five years earlier, the ruling party will have lost votes as things stand at present. But compared with the result of the 2016 local elections, the share should remain more or less unchanged. It is also important to note that the ruling party enjoys greater support in rural areas and that counting tends to take longer here. Based on these considerations, the ANC would have a good chance of chalking up a result of between 55% and 60%. For President…

Bad timing by the Turkish central bank

The Turkish central bank decided at its latest meeting to leave key interest rates on hold at 24.00% – so far, so good. Less good is that the accompanying statement now fails to contain the reference to the possibility of adopting further tightening measures as required. Monetary policy is now said to be aligned in such a way as to keep the inflation rate within the target range. Markets interpreted this as a signal that the tight monetary positioning was to be softened. This had the effect of unsettling the lira which at times fell against the euro and the US dollar to its lowest level since October last year. A closer examination shows the altered positioning of the central bank to be quite comprehensible when viewed against the fundamental backdrop. Price pressure has eased up noticeably in recent months and can be expected to ease further looking ahead. With…

CE3 countries divided over greater European integration

The European Union (EU) published its latest „Standard Eurobarometer“ at the end of November 2018. Among other things, this survey provides insight into the attitude of the population of the small CE3 countries (Poland, the Czech Republic and Hungary) towards the EU and greater European integration. The majority of the population in all three small Eastern European countries believes that their country is better equipped for the future inside rather than outside the EU. The reasons clearly include financial aspects as well as the desire for economic prosperity. Poland, for example, has been the largest net recipient of EU funds since 2009, and Hungary and the Czech Republic rank fourth and fifth in the league table of net recipients in terms of the corresponding figures for 2017. However, the recent EU survey has also shown that the incentives to join the EU go beyond this financial aspect, with the desire…

Rouble stays unrattled in the Ukraine-Russia conflict

As the year 2018 gradually comes to an end, it is high time for the rouble to take stock. This is likely to paint a patchy picture for the Russian currency as it took quite a beating at times in the course of the year at the hands of the euro as well as of the US dollar. It had some reefs to circumnavigate – including the emerging markets crisis and the Fed’s more restrictive monetary policy stance. Primarily, however, in the past few months it has been the sanctions imposed on Russia by the USA that have put the country’s currency on the defensive. The first round of sanctions came at the beginning of April as a response to the alleged Russian interference in the US presidential election campaign. Further sanctions followed in August/September when the USA reacted to presumed Russian participation in the poison gas attack on the…

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