Turkey’s cabinet will discuss adopting a tighter lockdown on Monday as President Tayyip Erdogan tries to prevent a second lost year of tourism revenues, officials said. Turkish press reports that retaliatory measures after Biden’s declaration of forced exile of Armenians in 1915 as “genocide” will also be tabled. Turkish markets calmed down in the afternoon, with TL and Borsa Istanbul appreciating by 16:30 Turkish time, largely on expectation that Ankara will respond in a measured way to Biden’s declaration. Tomorrow may be different.
Erdogan needs to rescue the critical tourism season
After the last cabinet meeting two weeks ago, as coronavirus cases surged, Erdogan reined in social activities and travel.
Total daily cases then peaked above 63,000 on April 16 before dropping sharply to below 39,000 on Sunday.
But government officials said the fall was not enough and ministers would look into imposing new measures to last through a May 13-15 holiday at the end of the Muslim fasting month of Ramadan, in a way that does not hit economic production.
“Cases…have been falling for a few days but this is not enough. A full shutdown will be on the cabinet’s agenda and this option should be implemented,” one official told Reuters, requesting anonymity.
The measures, while careful to allow economic production to continue, could close shopping malls and require special permits for intercity travel, the person said. Cafes and restaurants are already shut.
Last Friday, Health Minister Fahrettin Koca said the latest restrictions had shown some results including a 20% fall in cases in Istanbul and fewer hospital patients, though they were still a burden on intensive care units.
He also said measures would be tightened if the targeted fall in cases did not materialize.
CRITICAL TOURISM SEASON
Turkey has registered a total 4.63 million COVID-19 cases, with the death toll standing at 38,358. It is fourth globally in daily virus cases and first on a per-capita basis among major nations, while deaths peaked at 362 last week.
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Both tallies have shot up since Erdogan launched a period of “controlled normalisation” in early March.
A drop by two-thirds in tourism revenues last year ballooned Turkey’s current account deficit, putting pressure on its depleted FX reserves and sending the lira to a record low in November.
“Tourism is of critical importance for foreign exchange inflows,” the first official said. “So as not to miss out totally on the tourism season, these measures must be implemented strictly”, according to Reuters.
The lira has fallen the last six straight trading days to near its low water mark over concerns about tense U.S. ties, and also policy under a new central bank chief.
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“If it’s the solution, we have to put up with a full shutdown. But this must be done without harming the production side,” a second official told Reuters.
“The closure of schools and shopping malls appears appropriate given the infection risk.”
Previously, when total lockdown measures came to the agenda, Borsa Istanbul panicked, because domestic demand would drop precipitously. This time, there is little expectation that Erdogan would follow the advice of his ministers and health authorities. However, if Reuters is correct and he announces a total shut-down of the economy until the Id (14-16 May), equities cold tank again.
Cumhuriyet: NATO airbase, withdrawal from NATO’s military wing on agenda
Turkish Lira fell all the way to 8.48 against the American dollar, only to strengthen to 8.30 by late afternoon, as Erdogan refrained from provocative rhetoric after Biden’s genocide declaration. However, Presidential Spokesperson Ibrahim Kalin informed the press that Turkey will retaliate over time against this “insult”.
On Monday morning, opposition daily Cumhuriyet aired a news item claiming that the Cabinet meeting will also witness debate about urgent retaliatory measures against US.
The first such measure will be shuttering of the NATO Incirlik base in Adana, one of the largest American airbases in the world. It went on to write that Erdogan’s advisors are even contemplating a withdrawal from the military wing of NATO, as France and Greece had done so in the past.
It is difficult to foresee whether Erdogan would second such drastic measures, when the economy is an exceptionally weakened state. However, any of these measures could lead to market turbulence with dollar/TL testing new highs. Already investment bank UBS upgraded its dollar/TL forecast to 9.00 by year-end.
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