Bi-Weekly Report 26 March - 8 April 2019


The AKP-led Alliance secures a majority in the local elections amid an adverse economic backdrop

Annual headline inflation continued to fluctuate at c. 20.0% for a fourth consecutive month in March

The CBRT proceeded with a temporary hike of its effective funding rate (by 150 bps to 25.5%) in response to heightened volatility in the FX market ahead of the end-March local elections



The banking sector’s bottom line improved sharply in FY:18, due to a slowdown in provisioning and, to a lesser extent, higher net interest income

The Government waters down the controversial bank tax



The profitability of the banking system improved sharply in FY:18, mainly due to lower provisioning

Stronger pre-provision income, together with lower provisioning, is set to sustain profitability in 2019



The fiscal balance deteriorated in FY:18, but remained in surplus for a second consecutive year (0.6% of GDP)

The planned expansionary fiscal stance in FY:19 will not reverse the downward trend of the public debt-to-GDP ratio



Banking sector ROAE reached an all-time high of 16.0% in FY:18, mainly on the back of a significant decline in the cost of risk

Banking sector ROAE is likely to remain broadly unchanged at c. 15.0% this year



Economic growth reached a post-global crisis high of 4.1% in FY:18 -- up from 3.8% in FY:17 -- largely due to exceptionally high electricity production

The pace of GDP growth is set to moderate slightly, to a still high 3.8% in FY:19, as the impact from the past year’s spike in energy production fades



EC-ECB and IMF missions welcomed the country’s strong macroeconomic performance and progress on reforms, while stressing the need for continued efforts to address the remaining challenges



External adjustment continued in H1:18/19, with the 4-quarter rolling current account deficit narrowing further to 2.3% of GDP from a 3½-decade high of 7.2% in Q2:16/17

The capital and financial account balance, excluding IMF support, turned temporarily into a deficit in H1:18/19, mainly on the back by the withdrawal of foreign investors from the domestic debt market



Bi-Weekly Report 26 March - 8 April 2019