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Turkey, China & Geopolitics
Alvaro Ortiz
Chief Economist
Turkey, China & Geopolitics unit studies the economic and geopolitical situation of Asia, the Middle East and North Africa. Analysis is carried out from both the short-term and the strategic and long-term perspectives, focusing on the key emerging economies (EAGLEs) and with particular attention to China and Turkey. The Geopolitical unit also develops Big Data technologies and models for high-frequency economic, social, political and geostrategic monitoring. It is led by Álvaro Ortiz.

Latest Publications

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Geo-World: Conflict & Social Unrest - May 2017 Update

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Tensions surrounding the North Korean nuclear test program remained in the spotlight becoming one of the main US foreign policy concerns. The US announced its support for the Syrian Kurdish in the fight against ISIS. The campaign to seize Raqqa is accelerating. Recent peace talks in Syria as well as the “de-escalation zone” agreement reduced conflict intensity in May.

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China: Vulnerability sentiment improved notably in May

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Our China Vulnerability Sentiment Index (CVSI) improved notably in May, led by Housing, SOE and Shadow Banking components, which offset a deterioration in Exchange Rate Vulnerability Index. The improvement in CVSI reflects underlying investor confidence that macro-financial headwinds facing China still remain manageable amid policy efforts to anchor financial stability.

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Financial deleveraging: two steps forward; one step back

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After months of persistent regulatory tightening in domestic financial markets, China’s authorities unexpectedly fine-tuned their stance of monetary prudence by injecting liquidity into the banking sector. We interpret the authorities’ strategy as “two steps forward one step back”. After the market stabilizes and absorbs their messages, they are set to leap forward again.

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Lessons from the East

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While part of the western world strives to find defensive strategies with which to combat low economic growth, China goes onto the attack and speeds up its economic projection and external geopolitics by means of the Silk Road project.

Available in Spanish, English

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China | Now comes moderation

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After registering a stronger-than-expected performance in Q1, China’s economy started to show more signs of moderation in April. Growth moderation is due in part to the authorities’ monetary prudence and tight regulations targeted at the risky shadow banking activities as well as the overheating property market.

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Geo-World: Conflict & Social Unrest - April 2017 Update

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Tensions continued between North Korea and US over the nuclear test programme and the US increased its missile defence system in the area. China will continue to maintain the statuo quo while the tone of the US escalated but softened thereafter. In the Middle East, the advances of the coalition forces continue against ISIS. The US supported the YPG's advance in Raqqa.

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China | Banking monitor

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Macro-environment: Growth rebounds while markets under stress. Chinese banks performance: Still weak in 2016. Shadow banking system: Too big; too risky. Regulations outlook: Squeeze until you surrender

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Tracking chinese vulnerability in real time using Big Data

Document Number 17/13

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We develop an indicator to track vulnerability sentiment in China. In order to ensure robustness and depth, we use a combination of traditional macroeconomic and financial time series with textual analysis using Big Data techniques.The index is composed by the following dimensions: state owned enterprises; shadow banking; housing market bubble and exchange rate market.

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Turkey: Gradual Recovery Underway

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Incoming data suggest the gradual recovery in economic activity is still underway. Our monthly GDP indicator signals economic activity to grow at 3.3% YoY, slightly lower than 4Q16 growth of 3.5%. We think that lagged impacts of Government incentives on top of rapid credit expansion and tax cuts will be supporting growth, especially in 2H17

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China | Vulnerability sentiment edging towards neutral

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Our China Vulnerability Sentiment Index (CVSI) moderated in April after improving since July 2016. The CVSI is now edging to neutral, however the components of the index show divergence. The moderation can be related to a decline in housing and FX components. The shadow banking component remained positive on a tighter monetary policy stance and macroprudential measures.

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Turkey | Monthly Economic Monitor. April 2017

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Turkish lira appreciated mostly on local factors. Foreseeing a rising trend in inflation, the CBRT’s front-loaded tightening in April held the Turkish lira firm. On the activity side, ongoing fiscal stimulus, strong support through exports and credit growth helped GDP growth continue to be moderate in 1Q as well.

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Turkey | Further Rise in Inflation as Expected

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Consumer prices rose by 1.3% in line with the market consensus, but lower than our expectations (1.6%) in April. Thus, annual inflation rose further to 11.9% from 11.3%. The reason behind this month’s increase was almost entirely due to the surge in food prices. We estimate that inflation will fall into single digits in the last two months and end the year at 9%.

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China Economic Outlook. Second quarter 2017

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Q1 GDP edged up to 6.9% YoY, we expect 2017 annual growth rate would not deviate much from the newly set official target of around 6.5%. Prudent monetary policy and tight regulations start to effect .RMB exchange rate and foreign reserves has stabilised. Downside risks: housing bubbles ; currency depreciation; indebtedness of the corporate sector and shadow banking.

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Turkey: Further Tightening from the CBRT

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In line with our expectations, the Central Bank increased late liquidity window (LLW) rate to 12.25% from 11.75% and kept the rest of the interest rates unchanged. Market consensus was the CBRT to hold the entire set of rates constant. Our rate increase expectation was based on our inflation forecast where we expect to breach 12% in April and stay close to 12% in May.

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Turkey Economic Outlook. Second quarter 2017

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Turkish economic activity maintained the momentum of the “V”-shaped GDP growth recovery in 1Q17 thanks to the impact lag of fiscal stimulus and solid export demand from EU. Consumer prices jumped on the back of mounting cost push pressures. As inflation accelerated and the Turkish lira suffered due to electoral uncertainty, Central Bank strengthened its monetary tightening

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Big Data, Big Models and Big Analysts

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We didn’t have to wait long to see how Big Data would inundate our lives. When making a simple online search to plan a trip, listen to a song or buy a book, as if by magic we receive suggestions not just about what we’re looking for but about similar alternatives too

Available in Spanish, English

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Geo-World: Conflict & Social Unrest - March 2017 Update

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After the chemical weapons attack on Syrian civilian population, the US launched its first military strike against the Assad regime sending a clearer message to Syria and North Korea. However, it is still early to know whether this is a tactical message or part of a broader strategy. Europe and Asia kept with low conflict levels, while in North Africa, instability rose.

Available in Spanish, English

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Turkey | Monthly Banking Monitor. March 2017

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Total credit growth rate of the Turkish banking sector improved remarkably in March and reached 14% y-o-y. The annual rate accelerated to 26% signalling further growth for the coming months in the Y-o-Y rate. Net profit of the sector increased m-o-m by almost 30%. Net profit of public banks increased more than private banks.

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