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Macro and politics

Tacirler Investment

* Istanbul Chamber of Industry (ICI) December PMI figures will be announced @ 10:00 local time. ICI November PMI increased to 48.3 level from 45.8, while standing below the 50-threshold for the eighth consecutive month. After averaging 49.8 in Q1 2024 and 48.5 in Q2 2024, the manufacturing PMI dropped to an average level of 46.4 in Q3 2024. In the first two months of the final quarter, PMI averaged around 47, indicating a modest improvement in activity, but still signaling an overall deterioration in the manufacturing sector. Thus, the data received so far for the final quarter point to a slightly more optimistic outlook for activity compared to the third quarter. The evident rise in consumption in recent months raises the likelihood of positive quarterly growth in 4Q24, yet 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. Hence, we project GDP growth to conclude 2024 at around 2.9%, with a further slowdown to 2.6% by the end of 2025.

* The CBRT will release weekly foreign portfolio flows, money & banking statistics, and international reserves for the period of December 20 – 27 today @ 14:30 local time. Based on our calculations upon the CBRT’s analytical balance sheet, we estimate that during the week of December 20 – 27, the net international reserves rose by USD1.7bn to USD63.4bn and the gross FX reserves dropped by USD1.2bn to USD155.1bn. To recall the data from the previous week (December 13 – 20): The equity market experienced a foreign outflow of USD169.2mn, while there was a net foreign inflow to the bond market at an amount of USD336.8mn (excluding the repo transactions). Moreover, the foreigners’ share in total bond stock rose to 7.76% from 7.6%. Besides, the residents’ FX deposits dropped slightly by USD325mn (gold accounts excluded, EUR/USD parity adjusted), while the residents’ total FX deposits (including gold, price adjusted) slid moderately by USD180mn in the week of December 13 – 20. The CBRT’s gross FX reserves fell by USD7.2bn to USD156.3bn, while the net international reserves decreased by USD3.7bn to USD61.8bn during the same period. Net reserves excluding swaps also declined by USD3.5bn to USD46.4bn.

* Istanbul Chamber of Commerce has released monthly Istanbul inflation for December at 1.74% level. There is quite a strong correlation between Istanbul fresh vegetables & fruit price changes and TURKSTAT’S nationwide fresh vegetables & fruit price changes, which will be unveiled tomorrow. ICC announced that food prices registered a monthly rise of 0.93% in December and we believe there are downside risks to our house forecast based on the inflation data to be released by TURKSTAT tomorrow. We had previously stated our monthly inflation forecast for December at 1.8%, while the market estimate stands at 1.6%. We assess that the probability of the December CPI increase falling below 1.5%—and thus coming in below both our house forecast and market expectations—has risen.

* TURKSTAT released November foreign trade figures and imports rose by 2.7% y/y to USD29.7bn and exports dropped by 3.1% y/y to YSD22.3bn. We expect the current balance to revert to a deficit in the last two months of the year, with the annual deficit increasing slightly. We estimate that the current account balance will post a deficit of approximately USD3.2bn in November and around USD2.5bn in December. Accordingly, we expect the current account deficit for 2024 to close at approximately USD9bn (0.7% of GDP), excluding any potential revisions.

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