Weekly Report 3-9 May 2016

Political and economic uncertainty on the rise, following PM Davutoglu’s resignation

Headline inflation declines to a 3-year low of 6.6% y-o-y in April, mainly on the back of a sharp downward correction in food prices

Fiscal performance deteriorates in 3M:16, with the 12-month rolling budget deficit widening to 1.7% of GDP from 1.5% in December

Significant fiscal consolidation in 3M:16, with the 12-month rolling budget deficit narrowing to 1.0% of GDP in March from 2.9% at end- 2015

Heightening domestic political uncertainty prompts the Central Bank to tighten its monetary policy stance

Current account deficit widens to 1.5% of GDP in February from 1.4% at end-2015, on a 12-month rolling basis, due to lower transfers

Significant fiscal consolidation in Q1:16, due to a strong revenue performance as well as primary expenditure restraint

Record low inflation strengthens the BoA’s hand to cut the policy rate by an additional 25 bps in May

Customer deposit growth remains in positive territory in Q1:16

Banking sector deleveraging accelerates in Q1:16

Fiscal deficit widens in the first eight months of the fiscal year, due to a sharp increase in interest payments

A stand-by agreement with the IMF likely to be signed in early- 2016/17