Macro and politics

* The CBRT released the results of the December Market Participants’ Expectations Survey. According to the survey results, 2024YE CPI estimate increased further to 45.3% from 44.8%. Moreover, the 12-month ahead annual CPI expectation was revised down merely to 27.1%, from 27.2%, while the 24-month ahead annual CPI expectation rose slightly to 18.5%, up from 18.2%. We expect 2024 YE CPI at 45.4%, while we anticipate the annual CPI to conclude 2025 at 26%, with upside risks attached. Moreover, according to the survey results, market participants expect a 150bps rate cut in the upcoming MPC meeting slated for December 26^th, indicating policy rate at 48.5%, in line with our house estimate. The average year-end USD/TRY exchange rate expectation among survey participants dropped to 35.30 from 35.72, while the participants expect 12-month ahead USD/TRY at 43.3 level.  As per the growth and current account estimates: Participants forecast a 3% growth for 2024 and a 3.1% growth for 2025, while their current account deficit expectations are USD9.8bn for the end of 2024 and USD18bn for the end of 2025.

*The Consumer Confidence Index rose to 81.3 level from 79.8 to as of December, indicating 1.9% m/m rise. As per the sub-categories of the December data, the index related to the financial situation of households at present increased to 63.8 from 66.1, while the general economic situation expectation index over the next 12 months period climbed to 76.8 from 73.8. Moreover, the financial situation expectations of households over the next 12 months index rose merely to 81.9 from 80.6 and the sub-index index related to the assessment on spending money on durable goods index over the next 12 months compared to the past 12 months period, which is an important leading indicator in terms of domestic demand, ameliorated notably to 102.6 level from 98.6 level. The Consumer Confidence Index, which declined from an average of 79.8 in the third quarter to 76.8, rebounded to an average of 80.6 in the final quarter of the year, signaling some improvement in domestic demand. The evident rise in consumption tendency in recent months raises the likelihood of positive quarterly growth in 4Q24. Nonetheless, we anticipate that stringent financial conditions will place additional strain on the industrial sector, with annual GDP growth expected to decelerate further over the next two quarters.