The intriguing and somewhat bewildering world of "Monitoring Turkey." Brace yourselves for a journey through the labyrinthine twists and turns of Turkey's attempts at normalcy. Prepare to witness a spectacle that will leave you simultaneously amused, bemused, and perhaps a tad bit concerned.
As we step into this realm, let us take a moment to marvel at the audacity of a country that dares to normalize at a pace that could only be described as leisurely. Like a tortoise in a race against time, Turkey embarks on a slow and meandering journey towards finding its footing. It's a sight to behold, as the world watches in amusement, wondering if the destination will ever come into view.
In this topsy-turvy land of economic acrobatics, the Central Bank of Turkey takes center stage, offering us a performance that can only be described as a masterclass in under-delivery. With a flair for the dramatic, they hike interest rates for the first time in years, but alas, the applause from the consensus is notably absent. It's as if they aim to redefine the notion of meeting expectations, leaving analysts scratching their heads and recalibrating their predictive models.
But fear not, dear audience, for the Central Bank has grand plans to tighten its monetary policy stance. However, they have chosen the path of gradualism, treating us to a spectacle of incremental adjustments that rivals the slowest snail's pace. It's a stunning display of caution, as if they believe that moving at a glacial speed will somehow yield the desired results. Oh, the anticipation is palpable, as we wait with bated breath for progress to unfold at a pace that even a sloth would find leisurely.
And let us not forget the macro-prudential framework, that magical realm where simplicity becomes an enigma. The Central Bank promises to simplify it, but with all the grace of a contortionist attempting to tie themselves in knots while insisting it's a straightforward task. It's a performance that leaves us chuckling, wondering if they possess the secret art of turning the complex into the confounding.
As we navigate the peculiar twists and turns of Turkey's quest for normalcy, let us revel in the absurdity, the irony, and the occasional touch of brilliance that arises from this enigmatic nation. In the realm of "Monitoring Turkey," comedy and tragedy dance hand in hand, reminding us that sometimes, the best way to understand the world is through a lens. And so, we embark on this escapade, ready to question, and ponder the peculiarities of Turkey's slow path towards normalcy. It's a journey that defies expectations, challenges conventions, and leaves us wondering if normalcy will ever be more than an elusive mirage. Welcome to "Monitoring Turkey," where reality nad Dream intertwine, inviting us to explore the intriguing world of economic performance, cautious decision-making, and the occasional hint of absurdity.
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| Türkiye has chosen its future |
Central Bank's Gradual Monetary Policy Tightening
In a moment that was eagerly anticipated by economists and analysts alike, the Central Bank of Turkey finally made a move to hike interest rates after a prolonged slumber of over two years. However, much to everyone's amusement, their performance fell short of the consensus expectations, leaving the audience perplexed and scratching their heads.
With an air of deliberate caution, the Central Bank unveils its plan for gradual monetary policy tightening. It's as if they believe that slow and steady wins the race, while the rest of the world wonders if they even remember what winning feels like. Who needs decisive action when you can savor the taste of indecisiveness at a leisurely pace?
And that's not all. The Central Bank also promises to simplify the macro-prudential framework. Ah, simplicity, the elusive concept that seems to dance just out of reach. It's like watching a contortionist attempt to fold themselves into a pretzel while claiming it's a straightforward maneuver. We can only hope they have a Ph.D. in acrobatics. As the curtain falls on this act of gradual tightening, the audience can't help but chuckle at the spectacle before them. Will the Central Bank ever find the courage to take a leap of faith, or will they continue tiptoeing on the tightrope of uncertainty? Perhaps they're waiting for the right moment, like a magician who keeps the audience waiting for the grand reveal that never seems to arrive.
So, dear spectators, prepare yourselves for a performance of deliberate and measured steps. Sit back, relax, and witness the grand display of caution and hesitation. The Central Bank's gradual monetary policy tightening is a dance of delicate moves and hesitant strides, leaving the crowd both bemused and entertained. And as we bid farewell to this satirical portrayal of the Central Bank's gradual monetary policy tightening, we're left with one lingering question: Will they ever gather the nerve to step outside their comfort zone? Or will they continue to provide us with a steady stream of gradualism, leaving us in a perpetual state of anticipation? Only time will tell in this tragi-comedy of economic policy.
Overview of Turkey's Current Situation
The grand spectacle of Turkey's current situation. Prepare yourselves to witness a performance that rivals the most daring of tightrope walkers and trapeze artists. Behold as Turkey takes bold steps to ease liraisation targets and simplify the macro-prudential framework. It's a breathtaking display of ambition and audacity.
But hold on tight, for these daring acts come with a catch. Conventional policies, like a delicate dance, require an abundance of time—time that seems to stretch on endlessly. It's as if Turkey has discovered a secret dimension where minutes turn into hours, hours into days, and days into eternity. Oh, the patience required for such a performance!
As we gaze upon the stage, we witness the intricate steps taken to ease liraisation targets. It's a delicate balancing act, attempting to find the perfect equilibrium between stability and flexibility. Will Turkey succeed in their endeavor? Only time will tell, for they have mastered the art of elongating the moments, stretching them to their very limits. And let us not forget the macro-prudential framework, the enigma that haunts the dreams of economists far and wide. Turkey, in its quest for simplicity, treads on thin ice. With each step towards simplification, they tiptoe ever so cautiously, as if the very fabric of the economic universe depends on their every move. It's a high-wire act that keeps us all on the edge of our seats, wondering if they will maintain their balance or tumble into a sea of complexity.
But fear not, for Turkey's ambition knows no bounds. They are determined to conquer the realm of conventional policies, even if it means defying the laws of time and patience. They embrace the notion that good things come to those who wait, and wait, and wait some more. So, prepare to be captivated by Turkey's mesmerizing display of ambition and slowness. Marvel at their ability to stretch time and turn simplicity into an elaborate performance. As we watch their journey unfold, let us appreciate the artistry of delayed progress and the finesse of deliberate steps. In the world of Turkey's current situation, where time is an illusion and conventional policies dance to their own rhythm, we are mere spectators in awe of the spectacle before us.
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| Quarterly forecasts |
Downside Risks
The balancing act as we delve into the realm of downside risks in Turkey. It's a performance that will leave you marveling at the contradictions and uncertainties that pepper the economic landscape. Hold on tight as we navigate through the highs and lows of industrial production, real sector confidence, and the ever-elusive quest for stability.
We begin our journey with a weak start to the second quarter of industrial production. It's as if the engines of progress sputtered and coughed, caught off guard by a particularly nasty bout of stage fright. But fear not, dear audience, for recent data offers a glimmer of hope. It appears that the economic activity has found its rhythm once again, ready to conquer the challenges that lie ahead. It's a rollercoaster ride of optimism and apprehension, where each twist and turn brings new surprises. As we turn our attention to the realm of real sector confidence, we witness a tale of resilience and vulnerability. The sector has been on a path of recovery, slowly regaining its footing after stumbling in the face of adversity. However, there are sectors that bear the scars of TRY weakness. They find themselves juggling the weight of uncertainty and exchange rate fluctuations, their performance akin to a tightrope walker swaying precariously on a gusty day. It's a delicate dance between confidence and caution, where even the slightest misstep can send them tumbling.
Ah, the recovery in economic indicators, a spectacle attributed to the heroic efforts of reconstruction. It's a testament to the resilience and determination of a nation rebuilding itself. But let us not forget the cloud of risks that loom overhead. Foreign exchange volatility casts its shadow, threatening to disrupt the delicate balance that has been achieved. And then there's the tightening of policies, lurking like an overzealous stage manager, ready to pull the curtains on the performance of progress. It's a tug-of-war between stability and uncertainty, leaving us wondering if the risks will tip the scales or if Turkey's resilience will prevail.
So, fasten your seatbelts and prepare for a tumultuous ride through the realm of downside risks. It's a theatrical display of economic uncertainty, where the script is constantly rewritten and the outcome remains uncertain. Will Turkey defy the odds and emerge victorious? Or will the risks cast a shadow too dark to overcome? Only time will tell, as we eagerly await the next act in this tragi-comedy of economic performance and the dance between optimism and caution.
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| Real GDP (%YoY) and contributions |
Weak Start in Second Quarter
Preparing ourselves for a not-so-grand entrance into the second quarter of industrial production in Turkey. It's a performance that can only be described as lackluster, leaving us questioning the cosmic forces at play. Hold onto your hats as we explore the tale of decline, foreign demand, and the tremors of an earthquake that shook the very foundations of progress.
In April, industrial production took an unfortunate tumble, as if the stars themselves aligned to cast a shadow of disappointment. Foreign demand conditions descended upon the stage like an unruly audience, causing a disturbance that disrupted the harmony of production. Oh, the fickle nature of the global economy, where even the most robust sectors find themselves at the mercy of external whims and caprices. But let us not forget the earthquake, the dramatic event that jolted Turkey's industrial landscape. Its impact reverberated through various sectors, leaving a trail of sequential declines in production. It's as if the earthquake region became the stage for a tragic performance, with sectors stumbling and faltering under the weight of adversity. The show must go on, but sometimes the forces of nature remind us that they too can be demanding and unforgiving.
As we witness this lackluster start to the second quarter, we can't help but ponder the cosmic ballet of cause and effect. Was it a twist of fate that led to the decline in industrial production? Or perhaps it was simply a matter of unfortunate timing, where external forces conspired to dim the lights on Turkey's economic performance. It's a performance that leaves us searching for answers, like a detective trying to unravel the mysteries of an economic crime scene. So, brace yourselves for a tale of decline and disruption. Witness the dance of foreign demand and the seismic impact of an earthquake, as Turkey's industrial production takes an unexpected detour. It's a somber reminder that even the grandest of stages can be subject to the whims of fate and the uncontrollable forces of nature. Will Turkey recover and rise from the ashes of this weak start? Only time will tell, as we eagerly await the next act in this tragicomedy of economic performance and the unpredictable twists and turns of fate.
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| IP vs PMI |
Momentum Loss in April Retail Sales
Prepare yourselves for a comical twist in the world of retail sales in Turkey. It's a tale of momentum lost, a dance of disappointment that leaves us wondering if retail therapy can truly heal all wounds. Hold onto your shopping bags as we dive into the realm of retail turnover, energy contractions, and the ever-present specter of high unemployment rates.
In a surprising turn of events, retail turnover, which had shown signs of resilience after the earthquake, stumbled and lost its momentum in April. It's as if the shopping carts came to a screeching halt, leaving bewildered customers scratching their heads and wondering where the magic had gone. Oh, the fickleness of consumer behavior, where one moment they're swiping their credit cards with glee, and the next they're clutching their wallets tightly, fearful of the economic uncertainties that loom overhead. But let us not forget the role of energy contraction in this retail debacle. It seems that even the powerhouses of consumption were affected by the deflationary winds blowing through the energy sector. As energy contracts, so does the enthusiasm for spending, leaving retailers in a state of confusion and despair. It's as if the lights went out in the shopping malls, and the once vibrant atmosphere turned into a somber reminder of economic challenges.
And then there's the ever-present shadow of high unemployment rates, lurking in the background like an unwelcome guest at a retail party. The seasonally adjusted unemployment rate remains stubbornly high, casting a gloomy cloud over the prospects of consumer spending. It's as if job seekers are left wandering the aisles of employment, hoping to find a ray of hope amidst the sea of uncertainty. So, prepare ourselves for a retail of emotions. Witness the loss of momentum, the contraction of energy, and the persistence of high unemployment rates. It's a tragicomedy of consumer behavior, where wallets open and close like the wings of a confused bird. Will Turkey find its retail groove once again? Only time will tell, as we eagerly await the next act in this theatrical performance of economic ups and downs, consumer whims, and the everlasting dance of unemployment.
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| Retail sales vs consumer confidence |
Inflation Trends and FX Developments
Get ready for a dive into the intriguing world of inflation trends and the ever-fascinating FX developments in Turkey. It's a tale of numbers, prices, and the unpredictable dance of exchange rates. Buckle up as we embark on this ride of inflationary twists and turns.
Inflation, like a mysterious creature, continued its downward trajectory, leaving economists scratching their heads in confusion. It seems that lower price increases in non-food groups have managed to tame the beast for now. Ah, the irony of it all! As prices rise at a slower pace, we find ourselves wondering if inflation is simply taking a leisurely stroll through the economic landscape, as if it has all the time in the world to make its presence known.
But hold on tight, dear audience, for the plot thickens with the introduction of recent exchange rate volatility. Like a mischievous sprite, exchange rates playfully dance to their own tune, sending shockwaves through the realm of producer price inflation. It's as if the exchange rates decided to put on a show, accelerating the pace of inflation and leaving producers in a state of bewilderment. Who knew that a flicker of exchange rate volatility could cause such a commotion?
And here comes the twist! Brace yourselves for the impact of cost pressures in the near term. It's like watching a magician pull a rabbit out of a hat, except this time, the rabbit is a surge in costs. The stage is set for potential fireworks as these cost pressures have the potential to take center stage and impact headline inflation. Will it be a grand spectacle or merely a damp squib? Only time will tell, as we eagerly await the outcome of this cost-driven extravaganza. So, prepare ourselves for a dramatic exploration of inflation trends and the enigmatic world of FX developments. Witness the curious dance of prices, as they waltz to a slower tempo, and exchange rates, as they tango with volatility. It's a performance that leaves us questioning the laws of economics and the capricious nature of inflation. Will Turkey manage to keep inflation at bay? Or will it succumb to the whims and fancies of cost pressures and exchange rate fluctuations? Stay tuned for the next act in this mesmerizing theatrical production of economic numbers and the never-ending saga of inflationary surprises.
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| Inflation outlook (%) |
Weak Capital Flows and Current Account Deficit
Prepare yourselves for a delightful as we delve into the world of weak capital flows and the widening current account deficit in Turkey. It's a tale of deficits and disappointments, where economic forces collide and leave us questioning the delicate balance of financial flows. Hold onto your wallets as we navigate through the twists and turns of deficit woes and lackluster capital performance.
In a truly awe-inspiring feat, the current account deficit has managed to widen its horizons, reaching heights not seen since 2013. It's as if the deficit has discovered new heights to conquer, defying all expectations. Oh, the audacity! Who needs to balance the books when you can reach for the stars of deficit glory?
But let us not forget the cast of characters contributing to this deficit drama. Enter the net gold deficit, a formidable force that tips the scales of economic equilibrium. As gold finds its way out of the country, the deficit swells, reminding us that even the most precious of metals can wreak havoc on the balance sheet. And then there's core trade, playing its part in this deficit extravaganza, turning a once-surplus into a gaping hole. It's as if the forces of economic balance decided to take a vacation and left us with this grand spectacle of imbalance. And what about capital flows, you ask? Well, dear audience, prepare for disappointment, as weak capital flows take center stage. It's a lackluster performance, leaving us longing for a surge of financial vitality. Official reserves feel the impact of this underwhelming capital performance, dropping like a magician's disappearing act. It's as if the economic magic fails to impress, and the reserves vanish into thin air, leaving us wondering if they ever truly existed.
Brace yourselves for a whirlwind of deficits and lackluster capital performances. Witness the current account deficit take flight, reaching new heights of audacity. Marvel at the role of net gold deficit and core trade, as they dance on the tightrope of economic balance. And prepare for the disappointment of weak capital flows, as they fail to live up to expectations. Will Turkey find its way out of this deficit maze? Only time will tell, as we eagerly await the next act in this theatrical production of economic imbalances and the ever-elusive search for financial equilibrium.
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| Current account (12M rolling, US$bn) |
Actions to Support Budget Revenues
Prepare yourselves for a exploration of the government's ingenious actions to support budget revenues in Turkey. It's a spectacle of fiscal acrobatics, where tax rates soar, motor vehicle taxes take flight, and deposit schemes make daring leaps. Hold onto your wallets as we dive into this world of revenue-boosting measures that aim to control the widening budget deficit.
First on the agenda, we have tax rate hikes, the government's answer to the call for increased revenues. It's as if they've discovered a secret recipe for filling the coffers—simply turn up the heat on taxpayers! With a flick of the legislative wand, tax rates soar to new heights, leaving individuals and corporations wondering if they've accidentally stumbled into a tax-themed amusement park. Will these tax rate hikes be the magic potion that fills the budgetary void? Or will they simply lead to a chorus of grumbles and financial headaches?
But wait, there's more! The government introduces a motor vehicle tax increase, doubling the burden on vehicle owners. It's a daring move, as if they've decided to turn the ignition on the economy and rev up the revenues. Will this motor vehicle tax increase drive the budget towards a smooth ride of financial stability? Or will it simply leave taxpayers stalled on the economic highway, sputtering with frustration?
And let us not forget the audacious act of transferring FX-protected deposit schemes to the Central Bank. It's as if the government is playing a high-stakes game of economic hot potato, passing the burden of exchange rate risk to the central stage. Will this transfer lead to a graceful balancing act of financial stability? Or will it simply create a game of economic ping-pong, where the ball of risk bounces back and forth, leaving everyone on edge?
Lastly, we have the introduction of corporate tax discounts to support foreign trade. It's as if the government has decided to shower foreign trade with a shower of fiscal confetti, hoping to ignite a flurry of economic activity. Will these tax discounts unlock the doors to a world of prosperous foreign trade? Or will they simply be a fleeting moment of excitement, overshadowed by the complexities of international markets?
Buckle up for a wild ride through the world of revenue-boosting measures. Witness tax rates soaring, motor vehicle taxes doubling, deposit schemes shifting hands, and corporate tax discounts shining a spotlight on foreign trade. Will these actions be the magic potion that saves the budget from the clutches of deficit? Only time will tell, as we eagerly await the next act in this theatrical production of fiscal creativity and the ever-elusive search for financial stability.
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| Budget performance (% of GDP) |
Gradual Tightening and Monetary Policy Normalization
Prepare yourselves for a examination of Turkey's grand performance in the realm of gradual tightening and monetary policy normalization. It's a spectacle of slow-motion moves and carefully orchestrated gestures that leave us wondering if we're witnessing a performance or a leisurely stroll through the halls of economic orthodoxy. Hold onto your interest rate charts as we explore this world of incremental adjustments and the mesmerizing dance of monetary policy.
In a momentous act of moderation, Turkey's central bank governor raised interest rates, signaling a shift towards orthodoxy. It's as if they've discovered the secret to monetary enlightenment, but have decided to take baby steps towards the path of economic righteousness. Oh, the suspense! Will these interest rate adjustments be the key to unlocking the gates of stability? Or will they simply leave us in a state of perpetual anticipation, yearning for bolder moves and more decisive actions?
But fear not, for the central bank acknowledges the existence of inflationary pressures. They're aware that the beast of rising prices lurks in the shadows, ready to pounce on the unsuspecting economy. And so, they vow to strengthen monetary tightening gradually. It's a delicate dance, a performance of restrained resolve, as they navigate the treacherous waters of inflation. Will this gradual tightening be the magic touch that tames the beast? Or will it be a never-ending waltz, where the inflationary pressures twirl and spin, mocking the central bank's attempts at control?
And let us not forget the gradual simplification of the micro and macro-prudential framework. It's as if the central bank has embarked on a grand mission to untangle the web of regulations and create a harmonious symphony of simplicity. But dear audience, beware the dangers of gradualism! Will this gradual simplification lead to a streamlined and efficient framework? Or will it be a never-ending process, where each step forward is followed by two steps back, leaving us trapped in an eternal maze of complexity?
So, prepare ourselves for a gradual tightening and monetary policy normalization. Witness the slow-motion moves of interest rate adjustments, the delicate dance of inflationary pressures, and the gradual simplification of the regulatory framework. Will Turkey find its way to economic stability? Or will the specter of gradualism haunt their every move, leaving us in a perpetual state of anticipation? Stay tuned for the next act in this theatrical production of economic moderation and the never-ending quest for monetary normalcy.
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| Central bank funding |
Recent Pressure on Rates and Currency
Get ready for a exploration of the recent pressure on rates and currency in Turkey. It's a tale of foreign exchange reserves under siege, external imbalances, and the delicate dance of policy normalization. Hold onto your currency exchange receipts as we dive into this world of economic pressures and the ever-watchful eyes of market participants.
Foreign exchange reserves, those precious gems of economic stability, have found themselves in the crosshairs of external imbalances and FX intervention measures. It's as if they've stumbled upon a battlefield, caught in the middle of a fierce economic conflict. Oh, the plight of the reserves, caught between the forces of demand and the weight of intervention. Will they emerge victorious, standing tall as a beacon of stability? Or will they be trampled under the weight of economic volatility, like a fragile flower in a storm?
But fear not, for recent weeks have seen a glimmer of hope. The reserves have experienced an increase, like a phoenix rising from the ashes of uncertainty. It's a moment of relief, as if the economic forces have decided to take a breather and grant a temporary respite. But let us not forget, it's a gradual process of normalization that lies ahead. Will this normalization be a graceful ballet, where stability and policy align in perfect harmony? Or will it be a clumsy stumble, filled with missteps and unforeseen challenges?
And here they come, the vigilant market participants, ready to pounce on every policy signal and medium-term program announcement. It's as if they're the judges of an economic talent show, waiting to press that golden buzzer of approval or deliver the harsh critique of disappointment. Will the government's program and policy signals receive a standing ovation? Or will they be met with skeptical glances and raised eyebrows, leaving us wondering if they can truly deliver on their promises?
The realm of recent pressure on rates and currency. Witness the battle of foreign exchange reserves, caught in the crossfire of external imbalances and intervention measures. Marvel at the gradual process of normalization, where stability hangs in the balance. And keep a watchful eye on the market participants, the ultimate judges of economic performance. Will Turkey find its way to economic stability and regain the trust of the markets? Only time will tell, as we eagerly await the next act in this theatrical production of economic pressures and the quest for stability.
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| 10Y local bond vs FX basket |
Calmer External Debt Markets
Get ready to embark on a journey through the realm of calmer external debt markets in Turkey. It's a tale of bond spreads, volatility, and the ever-elusive search for stability. Buckle up as we navigate through the twists and turns of market sentiments and potential surprises lurking around every corner.
Ah, the drama of sovereign bond spreads! They danced to the tune of volatility, swinging like a pendulum, leaving investors on the edge of their seats. But fear not, for signs of a policy shift emerged, and the spreads found their footing once again. It's as if they discovered the secret recipe for calmness, a dash of policy adjustments and a pinch of optimism. Will this newfound stability last? Or will it be a fleeting moment of tranquility, soon to be overshadowed by the unpredictable whims of the market?
But let us not forget the risks that loom in the shadows. Yes, dear audience, the journey to calmer external debt markets is not without its perils. Further policy adjustments and potential inflation pressures lie in wait, ready to disrupt the delicate equilibrium. It's as if the calm facade could crumble at any moment, leaving investors clutching their bond portfolios with sweaty palms. Will Turkey navigate these risks with finesse? Or will they find themselves caught in a tempest of market turbulence, desperately searching for shelter?
Amidst the uncertainties, a glimmer of hope emerges. Shorter-dated maturities, those darlings of the debt market, find solace in the warm embrace of local demand. It's as if they've discovered the secret to popularity, attracting investors like moths to a flame. But wait, there's more! Additional financial commitments from Gulf peers may offer positive surprises, like a sudden shower of financial blessings. Will these commitments pave the way for a smooth journey through the debt market? Or will they be a temporary respite in an otherwise tumultuous landscape?
Fasten your seatbelts for a thrilling ride through the world of calmer external debt markets. Witness the dance of sovereign bond spreads, as they swing from volatility to stability. Marvel at the risks that threaten the tranquility, lurking in the shadows like mischievous gremlins. And keep a watchful eye on the shorter-dated maturities, as they bask in the glow of local demand. Will Turkey find its way to a serene debt market landscape? Only time will tell, as we eagerly await the next act in this theatrical production of market sentiments and the ever-present quest for stability.
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ICE US$ Bond Sub-Index Spreads vs USTs
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