May 25, 2024

To lag behind the world…

Despite the shocks from Europe and the Middle East, the world economy continues its slow growth thanks to expansionary monetary policies on a global scale. With the recovery of the USA and China, the world manufacturing industry PMI index rose to 48.9 in September, above the 48.1 level in August, breaking the downward trend of the last five months.
The risk perception regarding the European debt crisis continues to improve. With the expectation that the European Central Bank will take action, the rise starting from the debt markets of Spain and Italy, spreading to banking shares and the stock market in general, continues despite the fluctuations seen from time to time.

With the purchases of investors who trust that systemically important Spain and Italy will not be allowed to fail, the MSCI Eurozone index yielded 3.2% in September and 9.5% in the last three months. Wall Street showed a strong performance, increasing 2.4% last month and 5.8% in the last three months, despite the pressure of fiscal measures that will come into effect automatically at the end of the year.

Sensitive to the increase in global growth expectations, emerging market stock markets outperformed developed country markets with a return of 5.8% in September. China’s September PMI data rose by 50.1, close to 1 point compared to the previous month, supporting the soft landing scenarios in the economy.

Turkish stocks diverged negatively from the world markets for the first time since May. Against the 5.8% increase in developed countries, MSCI Turkey index has followed a horizontal course since September. The increase in public goods and taxes due to the deteriorated budget performance, the announcement that block sales can be made in the shares of Halkbank and Türk Telekom, which are public shares, and the tension with Syria to a military dimension were effective in the ISE’s lagging behind compared to the rest of the world.

The central budget, which consists of two-thirds of its total revenues from indirect taxes, started to run more than expected due to the contraction in domestic demand and imports. Despite the decrease in revenues, the government, which did not want to cut its expenditures drastically, limited the deterioration in the budget by increasing tax rates and increasing public goods. In this way, the debt rollover ratios were prevented from increasing in a way that would disturb the markets.

However, tax and price increases are expected to negatively affect inflation and growth in the coming months. Increases and tax adjustments made by the government in basic products such as alcohol, cigarettes, gasoline, natural gas, electricity, automotive are expected to increase consumer inflation by 1.2 points in total. The said estimation does not include the secondary effects that will come as a result of the producer companies’ hike due to the increase in costs.

We expect the secondary effects of the tax adjustments and public hikes made by the government to be limited due to the difficult domestic and foreign conjuncture in the economy. Therefore, we do not expect the Central Bank to make any changes in the expansionary monetary policy in the short term. The Central Bank will maintain its current policy as long as the outlook for core inflation does not deteriorate.

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