Macro and politics

* The CBT will release the January Sectoral Inflation Expectations survey @ 10:00 local time. According to the December survey results, 12-month-ahead annual inflation expectations decreased further by 0.1 points to 27.1% for market participants, by 0.2 points to 47.6% for the real sector and by 1 point to 63.1% for households. Please recall that in the November survey results, 12-month ahead annual inflation expectations showed a decline of 0.2 points for market participants, 1.7 points for the real sector, and 3.1 points for households. The December survey results indicated that the downward tendency in 12-month ahead annual inflation expectations sustained, albeit at a modest pace compared to previous month. The recent slowdown in the pace of inflation decline has been reflected in expectations; however, the overall downward trend in expectations remains intact.

* The Real Sector Confidence Index (RSCI) ameliorated to 100.9 level from 99.1 as of January, surpassing the 100-threshold once again. As a reminder, the index had slid to 99.1 from 100.4 back in December, sliding below the 100-threshold for the first time since September and indicating a pessimistic outlook to the economic activity by the real sector agents covered by the Survey. The seasonally adjusted RSCI, moreover, dropped merely to 102.6 level from 102.7 as of January. In addition, the unadjusted Capacity Utilization Rate (CUR) decreased to 74.6% from 75.8%, while the adjusted CUR eased to 74.8% from 75.6% in January. With the release of these preliminary data for January, we continue to compile the initial signals for economic activity in 2025. Our projections for 2025 suggest that economic activity will exhibit a pronounced cyclical pattern throughout the year. Based on the CBT’s output gap estimates, we expect the lagged impacts of tight monetary policy to continue to be felt until 2Q25. However, in the second half of 2025, we anticipate a modest rebound in activity, driven by easing inflation and the delayed impact of imminent rate cuts. Accordingly, growth, which we expect to decelerate to 2.9% in 2024, is projected in our baseline scenario to show a pronounced divergence between the first and second halves of 2025, ultimately closing the year at a subdued 2.6%, indicating a further decline from the previous year.