Департамент торговых идей

Falling export revenues and reduced demand for transport and tourism services, as well as the decline in industrial production and domestic trade resulting from the quarantine measures have reduced the Turkish economy in 2q 2020 by 9.9% yoy. Amidst a protracted economic downturn, the Turkish lira updates one anti-record after another, having lost more than 30% of its value since the beginning of the year, and double-digit inflation and high lending rates threaten to further overheat the economy and plunge it into stagflation.  In addition, military actions in Libya and Syria, anti-terrorist operations inside the country, as well as territorial disputes with Greece over gas-bearing territories in the eastern Mediterranean increase the likelihood of EU sanctions against Turkey.

Inflation in August slowed down to 0.1% mom from 0.3% mom in the previous month. In annual terms, the growth in prices slightly weakened from 7.1% to 7%. The weakening of inflation in August mainly occurred against the background of a seasonal drop in prices for agricultural products, while prices for non-food products slightly accelerated their growth, and the dynamics of changes in tariffs for services did not change. We keep our inflation forecast for the end of this year at 7.3% yoy.

State budget in the 2Q2020

The economy of Kazakhstan showed a decrease in GDP growth by 5.6% yoy in the second quarter, while the decrease in GDP for the first half of the year was -1.8% yoy. The service sector, represented by trade, transport and other industries, expectedly have gone into a deep slump due to quarantine restrictions, while the main support to the economy during this period was provided by the real sector: industry and construction. Growth in food prices remained at an elevated level in 1H2020, but overall inflation was moderate. Tightening of foreign currency regulation and the presence of the National Bank at the foreign exchange market allowed to extinguish the increasing volatility of the national currency and limit the speculative wave. External accounts dynamics was positive and the current account was formed with a surplus (1q2020 in $2.0 billion and 2q2020 in $96 million) due to the decrease in capital outflows of income on direct investments, as well as due to a relatively moderate reduction in the trade surplus balance. Despite the increased burden on the assets of the National Fund and the reduction in tax revenues, the country's consolidated assets decreased by only 0.1% due to the growth of the NBK IRs by 13.6% ytd.

At the end of 1H2020, the drop in global oil consumption reached almost 12% yoy. In turn, a significant reduction in oil production, both due to market mechanisms and the agreement of the OPEC+ countries, led to a decrease in supply by more than 13% yoy. In June demand exceeded supply by almost 2 mn b/d for the first time since the end of 2019, which contributed to a reduction in excess reserves and an increase in the average price of a barrel of Brent crude oil above $40. The bottom of the slump in prices and the decline in oil consumption has already been passed, however, due to the possible second wave of COVID-19 and geopolitical tensions in the world, the level of uncertainty in the oil market remains high. Against this background, revenues from oil exports of Kazakhstan decreased by 8.5% yoy to $15.1 bn in 6M2020, despite an increase in the physical volumes of oil exports by 7.8% yoy. Taking into account the Ministry of Energy's forecast for oil export volumes and expectations for oil prices for the second half of the year, in general for 2020, export revenues will decrease by about $10 billion, or almost 30% compared to the last year.

All regional economies evidence a significant slowdown amid the coronavirus pandemic and the imposed quarantine measures, and the economy of Uzbekistan was no exception, although it remained in the positive GDP growth zone of 0.2% yoy in 1H2020. The Central Bank of Uzbekistan easied its monetary conditions by lowering the rate from 16% to 15% to meet the current challenges. The country's international reserves rose by 10.8% amid rising gold prices since the beginning of the year. The current account deficit is decreasing, but it is expected to widen by the end of the year. At the same time, large-scale economic reforms initiated back in 2017 are being implemented at a slow pace, especially with regard to the privatization of state-owned enterprises. Thus, prior to the expiration of the previous privatization strategy for 2019-2021, two new strategies were developed for the period 2020-2025. In accordance with those documents, by 2025, more than 37% of state-owned companies should become private, and the share of private banks' assets should increase from 15% to 60%. 

Inflation in July slowed down to 0.3% mom from 0.4% mom in the previous month. In annual terms, the growth in prices slightly accelerated from 7% to 7.1%. This acceleration is mainly due to double-digit growth in food prices and higher tariffs for services, while prices for non-food products are showing a comparable growth rate as in the previous year. We maintain our end-of-year inflation forecast at 7.3% yoy.

Housing prices and rents rose by 3-5% in 1H2020

We expect a decrease in the base rate of the National Bank to 9% by the end of this year and recommend buying tenge bonds of the Ministry of Finance with a maturity of 3-5 years.

Inflation in June slowed to 0.4% mom from 0.5% mom in the previous month and 0.9% mom in April. In annual terms, price growth accelerated from 6.7% to 7%. Given the recession processes that began in the economy, accompanied by a fall in household incomes, we expect a significant slowdown in inflation, while annual price increases are unlikely to exceed 7% in the second half of this year.